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Aviva predicts over 75% of market could be restricted

Aviva predicts the proportion of advisers providing independent advice is set to fall dramatically post-RDR with IFAs accounting for just 13 per cent of the market by 2015.

Speaking at the Marketforce Impact of the RDR conference in London this week, Aviva RDR implementation manager Ross Anderson set out Aviva’s forecasts on how distribution will change over the next three years.

Anderson believes the proportion of the market delivering independent advice will fall from 70 per cent in 2009 to 50 per cent in 2013, before a further fall to only 13 per cent in 2015.

He believes the proportion of the market offering restricted advice will go from 23 per cent in 2009 to 40 per cent in 2013, before increasing to 75 per cent in 2015.

For the direct market, Aviva’s estimates are that it will grow from 7 per cent in 2009 to 10 per cent in 2013 and 12 per cent in 2015.

Anderson said: “There is a wide range of different views on how big independent versus restricted will be.

“I have put up a provocation here to say that if you are looking at independence strictly from the regulator’s definition, that is going to be potentially a very small part of the market, both in terms of regulatory censure but also in terms of the cost of providing independence.

“Whether it is termed as restricted whole of market, or restricted multi-tie, this could well be the market norm with chartered status potentially becoming the differentiator from the customer’s point of view.”

Anderson also estimates there is a 30 to 40 per cent difference in time saved in delivering restricted advice compared to independent advice.

He said: “If you go through the advice process based on the purest description of independence and a complete review of the market, compared to a restricted multi-tie environment, the difference of  time saved for the advice process is significant.

“There is a 30 to 40 per cent time difference unless technology comes in to support the review process.”

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. More scaremongering over restricted and independent. Consider the commercial motivation here; of course Aviva wants the market to be mostly restricted.

    Even if these forecasts did prove correct, which I doubt they will, what a great opportunity it represents for those advisers who retain the gold standard of advice and stay independent post-2012.

  2. A survey undertaken by CoreData reporting today suggests full independent advice will be offered by 73.8% of IFAs post RDR.

    Not sure where Mr Anderson gets his information from but CoreData interviewed IFAs.

  3. Of course Aviva, Standard, Friends and AXA are going to say this. It’s their only hope of staying in the game long-term.

    And quite frankly, I agree with Martin Bamford. The more advisers who restrict themselves, the larger the commercial opportunity is for my firm.

    I do think Aviva and co will be sorely disappointed by the outcome. They need advisers to adopt a “hard” form of restriction (or multi-tie). I think most restricted advisers will (out of inertia) opt for a “soft” form of restriction to allow them to carry on doing what they do now. (The fact that they will eventually realise that in the brave new world that’s not enough is another story).

  4. Derek Bradley ceo PanaceaIFA 30th March 2012 at 2:56 pm

    An interesting subject. Our RDR Sants Survey conducted in December indicated that 66% would remain independent, 22% restricted and the rest not yet sure. So I think the restricted trend they suggest is right.

    It was also the case that 85% reckoned that their clients did not understand the difference between the then new FSA definitions of independent and non independent advice.

    You can see more via this link http://www.panaceaifa.com/main/st5833.htm

  5. @Martin 1.10pm Oh who cares about a name? The overwhelming majority of us IFA’s are currently operating a restricted model as defined by morns in Canary Wharf. We have got so much more to worry about with RDR than the name of Independence, like staying in business. If you think that “Independence” is going to make that much of a differnece then you have gone down in my estimation. The Gold standard wont be independence it should be Chartered Status, but imagine the confusion of a chartered firm of restricted adviser’s. Im telling you, you just couldnt right this stuff.

  6. Can’t say I’m surprised by these figures.

    The FSA has all but killed the unique position of IFAs and by making their lives hell they are likely to go down the ‘restricted’ route which, in reality, isn’t that restrictive.

    Can a ‘restricted’ adviser source the whole market – yes.

    Can a ‘restricted’ adviser continue to give a good service – yes.

    Will a restricted adviser lose out to one who claims independence? Almost certainly not when the service offered may provie identical for all bt a small percentage of the public.

  7. Jeremy Newbegin 30th March 2012 at 5:35 pm

    I’ve been operating a restricted model, if you go by the FSA rules, for many years. It hasn’t hurt my business, and hasnt hurt my clients either who, be defination, have chosen “restricted” advice by wanting to invest ethically. I am not so sure being independent is all its cracked up to be – there are much more important issues like trust, a fair price, and an ongoing quality service.

  8. Tim, you are of course absolutely right that those IFAs who adopt ‘restricted’ on a mass scale will do so purely because of the FSA’s determination that Independence will be defined by relation to the range of products advised on rather than simply the relationship with providers as at present.
    But I suspect that even that group will at least initially, retain Independence.
    Where Aviva are probably right – although the scale of their prediction is questionable – is that the number of independent firms moving to RDR will increase in the first few years of RDR.

  9. If IFA is the “gold” standard let’s all aspire to it.

    How do you explain to a client that you were once totally Independent, but now you are “restricted” as to what you can advise on?

    No one at the regulator has thought this through and if the majority of current iFAs go the restricted route, there has been no mechanism put in force to educate the consumer as to what the difference is.

    Pathetic really and the losers are the consumers.

    Typical reaction post 2012 – “I used to have an IFA to go to, but I can’t afford him/her charges anymore so I will go to my bank”

  10. The banks will be charging fees too, and they have a lot more people to pay than most IFA firms.

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