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Blog: Why the ‘shrinking advice market’ is a myth

How many advisers are there? That shouldn’t be a purely academic question; if we care about access to good financial planning, then it is a key part of how we should judge our success or failure.

I’ve heard the same refrain about a “shrinking market” since I started covering the profession. A frequently quoted statistic is that there were 250,000 advisers back in the 1980s, and now there are more like 20,000.

On the face of it, a ten-fold drop would be cause for concern. Indeed, how few advisers there currently are should be a priority for professional bodies, trade bodies, firms and regulators.

But there are a whole host of reasons why that 250,000 figure has grossly over-exaggerated any contraction there has been.

The overshoot

If you think 250,000 sounds like an implausibly high number of advisers, that’s because it is. As advice firm Perceptive Planning points out, that would have meant advisers were 1 per cent of the working population at the time.

Even if there were 250,000 ‘advisers’ in the market, nominally at least, there was absolutely no way these were all giving ‘proper’ advice.

Not only were direct sales forces from the likes of Allied Dunbar and Prudential huge in scale, banks and other firms’ tied sales forces had a significant hold in the market to inflate the figures.

The way data was collected was also an issue. Outgoing Threesixty managing director Phil Young says broker consultants who got a percentage of commission from IFA sales used to be recorded as an ‘adviser’ for payment reasons, for example.

The 250,000 figure was “never close to true”, Perspective says, as some large firm counted all client-facing staff, including receptionists and part timers, in their numbers.

Also, bear in mind a good number of advisers will have fallen through the cracks of data collection as the regulator changed four times since the 80s, from FIMBRA to the PIA to the FSA to its current iteration, the FCA.

Market movers

I am perfectly happy to accept that the RDR reduced the number of IFAs in the market, at least temporarily, and this trend had been going on for a few years previously.

The best numbers you can find are from Apfa’s historical analysis of FCA data, which says that the number of staff giving advice dropped from 27,080 in 2009 to 23,865 in 2012.

But it has picked up again, rebounding from a trough of 22,168 in 2013, as the RDR came into force, to 24,761 today.

(Director general of adviser trade body Libertatem Garry Heath seems to think 13,500 advisers have left the sector since RDR was announced, but I’m struggling to find where the numbers in his report comes from.)

The number of firms setting up trainee or apprentice schemes also provides plenty of cause for optimism.

We may agree the answer to the question of how many advisers there are is “not enough”, but the cataclysmic drop off has never been as bad as the some would have you think.

If the market can come through the RDR without a huge contraction, it will probably survive the next one.

This article is the latest in a Money Marketing series on reasons to be positive about the advice market

Justin Cash is news editor at Money Marketing. Follow him on Twitter @Justin_Cash_1



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  1. Justin: I do not know where you get a 250,000 figure as its the first time I have seen it.

    It might relate to the pre-regulation guesstimate of IFAs Insurance Brokers, banks, DSFs and Industrial Branch combined but it isn’t valid and I have never used it.

    You also conflate separate and different figures. The Heath Report 2 looked at the availability of Financial advice across the board not just Independent investment advice.

    So it looked at Investment advisers, protection advisers and bank advisers.
    In 2007 there were 39,000 investment and protection advisers. Banking adviser numbers unpublished
    In 2010 this dropped to 36,000 plus nearly 8,500 banking advisers.
    In 2014, investment and protection advisers dropped to 33,000 and we estimated the banking numbers to be circa 1,000

    So from 2007 to 2015 investment and protection advisers dropped from 39,000 to 33,000 – a drop 6,000 as pe THR2 using the FCA’s own figures. Your 13,500 figure includes banking advisers.

    RDR primarily impacted on Investment advice. so your numbers on investment advisers are correct but I would suggest a health warning.

    Independent adviser numbers have done well in the last 5 years. Firstly because those likely to retire within a 5 year window did so in 2013 when RDR came into force.

    Secondly thousands of ex bank advisers jumped over to the Independent side as their banks left the mass retail market.

    From this year on; the window reopens and advisers will start to retire again in numbers and most banking advisers have already moved. New academies may give some help but will it be enough?

    The big drop is in the client/adviser ratio which dropped from 405 to 190 in a similar period.

    This is likely to have dropped further in the current market to around 150 per adviser.

    We are doing the research now both into the ratio but more importantly into succession planning within the sector.

    We hope to have more in the Autumn

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