Despite fears that the introduction of the Retail Distribution Review would lead to a mass exodus of financial advisors operating in the UK, the reverse has been true and the number of advisors in the industry has actually increased, according to new figures from the Financial Conduct Authority.
In July 2013 there were 32,690 retail investment advisors working in the UK, a rise of 5 per cent from 31,132 advisors in December 2012.
The FCA noted that the number of advisors rose 6 per cent from 20,453 to 21,684. The UK financial watchdog attributed this increase to people re-entering the market.
One of the unintended consequences of the RDR has been the advice gap, which has priced consumers out of receiving independent financial advice, creating a problem sometimes described as "orphan" clients. (To see an interview exploring the impact of regulation in this regard, and in driving mergers and takeovers, click here.)
Although the figures fell within the range predicted by independent researchers commissioned by FCA’s predecessor, the Financial Services Authority, Andrew Power, lead RDR partner at Deloitte, suggested that the increase in numbers would do little to remove the advice gap created by the RDR.
“While it might appear consumers have access to more advisors, the economics of financial advice means the remaining advisors in the market will need to focus on clients outside the mass market if they are going to have a sustainable business, or develop a viable guided advice model,” Power said.
Ian Colquhoun, director of sales and marketing for specialist products at AXA Wealth, said the increase was positive news for both advisors and consumers.
"Recent research from AXA Wealth found that one in five (19 per cent) consumers who have not sought financial advice in the past intend to do so in the future to ensure they have sufficient income for their retirement. With the number of advisors on the rise and the number of consumers seeking professional financial planning help set to increase, this could be a win-win situation," said Colquhoun.
The research, conducted by RS Consulting, found that six months after the introduction of the new rules, 97 per cent of advisors have the appropriate level of qualification, with the final three per cent studying within the timescales permitted by the rules. This contrasts with 2010, when less than half of all advisors were qualified to today’s standard.
The data also revealed that the number of qualified financial advisors was 21,258, with 426 partly qualified.
Meanwhile, 2,212 stockbrokers were RDR-qualified, with 56 partly qualified, compared to 1,752 qualified discretionary investment managers, with only 32 partly qualified.
“Today’s figures show that those looking for financial advice still have plenty of options open to them. What’s more, by establishing standards across the industry we are helping to build confidence by reassuring consumers and raising the profile of the advisor profession," said Clive Adamson, director of supervision at the FCA.
(Editor's note: As the story says, re-registration may account for part of the rise in the numbers, so the FCA should be wary of cracking the champagne just yet. One reason why the RDR's impact may not have been as grim as some feared is that a lot of advisors who saw the impact coming had already left the sector before the start of this year. New blood is also, so my sources tell me, coming as firms develop talent in-house. I think it would be best to wait for a while longer before wondering if there is a genuine growth story here. But if there is, it is a piece of rare good news.)