Four out of 10 advisers are concerned about remaining profitable, with regulation and professional indemnity their top spending worries, new research shows.
The Aviva Adviser Barometer, published last week, reveals 49 per cent of advisers are concerned about regulatory fees and levies, while 41 per cent worry about professional indemnity costs.
A question asked exclusively for Money Marketing also reveals that 48 per cent are concerned about the FCA’s increasing use of skilled person reports and the associated costs to the industry.
Skilled person reports, also known as section 166 reports, check for weaknesses or failings in a firm’s practices. The regulator orders these reports to be carried out where it has concerns – and firms have to meet the cost.
In August, figures released by the FCA in response to a request from the Treasury select committee showed the average cost of a s166 report in 2013/14 was £2.9m and the total cost of reports was £145.7m.
The survey also shows that only 13 per cent of advisers believe changes to the retail mediation activities return in December will sufficiently reduce the regulatory disclosure burden on advisers.
The FCA has said the changes, which include moving to an annual rather than six-monthly, reporting structure for section K will halve the annual reporting costs for advisers from £2.6m to £1.3m.
The Budget remains at the centre of industry thinking, with 58 per cent believing it has created an opportunity for advisers.
Three out of five advisers have seen a rise in business in the over-55 age bracket while half have also noted an increase in over 65s business. Some 69 per cent of advisers say the size of their active client base has increased in the past 12 months.
However, only 15 per cent of advisers believe the Government’s guidance guarantee service will result in increased business for their firm.
Half of those surveyed said their clients will be interested in making use of tax recycling options as a result of the reforms.
Adviser business models are also changing, with more going restricted but 79 per cent remain as IFAs, down from 83 per cent last year, and 5 per cent offer a mixture.
Aviva intermediary director Andy Beswick says: “Advisers are seeing a significant increase in demand for advice, particularly among retirees. I expect that to continue but only if advisers can find more efficient ways to service clients.”
Lee Robertson, chief executive, Investment Quorum
There is a conflict between rising costs and recent research from Unbiased.co.uk which showed adviser fees are falling. Lots of advisers seem to work on incredibly fine margins which makes them sensitive to increases in regulatory costs such as PI cover.