Comment from David Harrison, Managing Partner, True Potential LLP
Financial advice should not solely be the preserve of the rich. We are facing a devastating savings crisis in the UK and what’s needed more than ever is for as many people as possible to be able to access sensible, impartial financial advice.
Sadly, that did not seem to have been the view of our industry regulators, when they devised the Retail Distribution Review (RDR), the biggest shake-up of our industry for decades.
For those that haven’t been following, when the Financial Services Authority, replaced by the FCA in 2013, announced the RDR in 2006, the industry, including ourselves, predicted that it would lead to an advice gap – meaning some people would be priced out of financial advice by advisers who couldn’t justify the lower returns from smaller portfolios.
It seemed, though, that the regulator either wasn’t listening or didn’t care. Now, a year on from the RDR’s arrival in January 2013, it seems that the latter was the case.
Adair Turner, former head of the FSA, speaking in January 2014 at the New Model Adviser conference, confirmed what we had all suspected all along – that the regulator knew that the RDR would create collateral damage and that, in his opinion, mass-market financial advice is basically unfeasible.
With messages like that coming from the regulators, it’s no wonder we’ve seen so many potential clients turned away by advisers who don’t think they can get value from representing them. The latest estimate, by NMG Consulting, indicated that as many as 60,000 people were turned away by an adviser in 2013.
Authorities and regulatory bodies should, by and large, be there to act in the best interests of the majority of the population. But what we have is 60,000 people who have been left frustrated and disillusioned by an industry that should be opening its doors to more people, not retreating into its shell and only dealing with those from whom the most money can be made.
I’m uncomfortable with the notion of tens of thousands of people being turned away by advisers. It would be like Tesco introducing a minimum £150 spend-per-trolley, and refusing entry to anyone else who didn’t fit their business model.
My advice to savers and investors would be, don’t be put off seeking financial advice – and to advisers I would say don’t ignore the large portion of the market that is currently desperate for guidance.
I’m not suggesting any form of altruism here, because there are still business models available to advisers that allow them to work on a larger scale. Technology exists that helps people work with greater numbers of clients, and remain compliant, without lumbering themselves with unmanageable recording and reporting processes.
Keeping advice accessible to everyone should have been a priority of the FSA. Sadly, it wasn’t, but I really hope the industry can find ways to succeed in this regard despite the impact of the RDR.