Fundhouse Insights Latest Articles

Opportunity knocks for post-RDR advisers

Published: June 6, 2014 by Kevin O'Donnell, financial writer and journalist

If Aviva’s survey of 1500 advisers is to be believed, advisers are the most optimistic they’ve been since 2009.

Despite predictions of their demise it appears that most IFAs are in robust health and coping well with change. Many are even looking forward to the future – quite a contrast to the often doom-laden comments you read online these days in some advisers’ comments on news stories and blogs.

It is not all hunky dory. There are continuing challenges for the adviser, but the sentiment among advisers is a positive one. That is not just my view, by the way, it is the latest finding from the Aviva Barometer, a survey of 1500 advisers published last week. It shows that advisers are the most optimistic about business since the survey started in 2009.

I am, to be fair, always a little sceptical of these polls. There are many but the Aviva barometer has been around for half a decade and is probably as accurate as most, but why the optimism? For advisers already feeling gloomy about the future it is probably not worth reading on but for everyone else it appears the post-RDR world is a relatively benign one for advisers and the Budget changes have simply fuelled the feel-good optimism. While not referred to in the survey, the fact the UK economy has now seen five quarters of growth must also have helped. More buoyant clients are likely to be those more willing to invest and save and, of course, be more willing to pay adviser fees.

The survey found a number of factors that suggest the intermediary sector is finally set for growth after years of decline. After the battering the sector received from the RDR, which undoubtedly speeded many adviser retirements, this is welcome news.

The barometer found that two-thirds (64 per cent) of advisers have recently increased the size of their active client base compared to only 28 per cent in September 2013 and a third (35 per cent) of advisers are looking to hire new staff in the next 12 months. Interestingly, the bulk of the client growth is in clients new to the market (43 per cent) rather than former clients of other advisers (34 per cent), suggesting that new clients are actively seeking advisers and there is a growth in the total number of clients willing to be advised.

The majority (86 per cent) of advisers think the proposed pension reforms are positive although regulatory fees remain the biggest concern for half of advisers (48 per cent). Only 4 per cent of advisers plan to quit the industry.

So far, so good but deeper analysis of the figures suggests that it is not quite a return to the “good old days” – more of a realisation that there is a new world for advisers and there are opportunities to be had for those with the right proposition.

It is not all plain sailing, too, as I suggested earlier. The number of advisers offering only independent financial advice has shrunk. There are 5 per cent fewer independent advisers than 12 months ago (79 per cent now compared to 84 per cent a year ago) and 15 per cent of advisers are now offering restricted advice (up from 10 per cent in March 2013) – a clear shift from independent towards restricted advice.

I mentioned opportunities and there are plenty ahead. Two- thirds of all advisers identified the Budget reforms as one of the greatest ever opportunities in the advisory market, with a similar number (64 per cent) looking to actively pursue new openings. Growth in “at retirement” and low interest rates should also increase the need for financial reviews, said many.

Intriguingly, one of the clearest opportunities identified by investment advisers is offering an online solution for clients with less investment income (34 per cent). I have long argued that making financial advice much more affordable is the only realistic way to bridge the advice gap. A relatively small number of advisers charging a premium for high quality professional financial advice may well be a viable market but it will never serve the millions who could benefit from a lower cost, online service which at least offered them some reassurance they were doing the right thing when it came to their money.

It is encouraging that many advisers, based on this report and anecdotally, are considering or have even launched an online service designed to do just this. It is worth remembering too that as they are mostly self-made individuals many advisers retain an entrepreneurial streak.

“It is encouraging that many advisers, are considering or have even launched an online service”

The adviser of the future may well talk to clients on video calling and ask them to fill in their details online in order to offer a lower cost, fixed price service.

There is nothing wrong with this and indeed as long as the professional advice offered is of high quality the potential benefits to millions are huge. Time will tell whether advisers can truly seize the opportunities but the prospects are promising and most importantly advisers seem up for the challenge.

Kevin O’Donnell is a financial writer and journalist