Freedom of information requests by trade publication Financial Adviser have suggested that the number of financial advisers in the UK has fallen by almost three quarters in the last decade. The magazine believes that there were 105,710 authorised advisers on January 1 2006 and just 29,144 in February 2016. This generally tallies with information from the trade association the Association of Professional Financial Advisers, which estimated that there were 31,153 advisers in its 2015 annual survey of the sector.
The number of firms authorised to offer advice has not fallen by as much, from 11,286 back in 2006 to 9,955 now, reflecting the fact that in the past banks, insurers and other large firms typically had large adviser ‘sales forces’, which either no longer exist or are much smaller in nature.
The costs of regulation, the high average age of the adviser population and the unwillingness of many firms to invest in new entrants have all been cited as reasons for the reduction in numbers. Many people speak of an ‘advice gap’ having been created as a result, where some consumers wish to receive financial advice but do not do so, perhaps because they cannot afford it, or do not know how to go about accessing it.
The Treasury and the Financial Conduct Authority jointly launched the Financial Advice Market Review to look at whether the financial advice market is working in the interests of consumers, and one of the aims of the review was to “radically improve access to financial advice.”
However, some commentators have suggested that the main aim of the Review is to facilitate the return of the banks to mass advice, and that the recommendations contain little of relevance to advisory firms.
In total, the Review made 28 recommendations for changes to the financial services marketplace. These recommendations include:
• The Treasury should launch a consultation on a proposal to amend the definition of regulated advice, so that a firm’s actions are only considered to be regulated advice when a personal recommendation is made
• The FCA should issue guidance to firms on how they can offer ‘streamlined advice’ and still meet regulatory requirements, guidance which should include a series of illustrative case studies. Firms have previously suggested they could limit the costs of giving advice if they were able to carry out ‘simplified advice’ focussed on a single need area, but have been wary of how the regulator and the Financial Ombudsman Service might view the matter
• Trainee advisers to be allowed to give advice under supervision for four years, up from the existing two and a half years, before being required to pass an appropriate Diploma qualification
• The FCA should work with the industry to look at reducing the length of suitability reports
• The FCA should set up an Advice Unit aimed at assisting firms in launching automated advice (or robo-advice) systems
• The Treasury should consider allowing consumers to access a small percentage of their pension fund before the usual age of 55 in order to pay for regulated advice on retirement planning
• The Financial Services Compensation Scheme should look at introducing risk-based levies based on individual products, and on reforming the existing funding classes
• The FCA should review availability of professional indemnity insurance for smaller firms
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.