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.
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.
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