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E&Y: 3,000 to quit advice during 2013

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Ernst & Young says adviser numbers will drop to 20,000 this year, while life companies have experienced “slow” new business figures post-RDR.

The firm estimates there were around 23,000 advisers at the start of 2013 – a number which does not include the decision by HSBC and Santander to exit mass market advice earlier this year.

Ernst & Young EMEIA financial services partner Trevor Hatton expects this figure to drop substantially during 2013.

He says: “The past year or so has been particularly challenging for life companies, asset managers, platform providers and distributors.

“Anecdotal evidence suggests that, following an excellent Q4 2012, new business for many players during Q1 2013 has been slow.

“This is unsurprising given the fundamental change to market dynamics driven by RDR, and we expect to see a steady improvement as the year progresses and as consumers and advisers get to grips with the new environment.

“However, we remain of the of the view that adviser numbers will continue to fall for some time. And we think our 2009 forecast of 20,000 by year end remains realistic.”

In February, the Treasury-appointed ‘Sergeant Review of Simple Financial Products’ set out a range of simple policies it believes providers need to develop.

Hatton says the review “throws down the gauntlet” to the insurance industry.

He says: “Our immediate reaction is that it will take some time for these products to gain traction and that simple life cover, if launched, could gain share most quickly.

“In any event the Sergeant Review throws down the gauntlet for life companies and we expect to see a positive reaction.”

In addition, Hatton expects the Financial Conduct Authority to be “more interventionist and intrusive” than the FSA, with a “significantly” increased use of thematic reviews and section 166 reports.

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Comments

There are 18 comments at the moment, we would love to hear your opinion too.

  1. If this comes true then it is no good those left saying it is good for them as the reason so many are leaving is because RDR has made it impossible for average man/woman to pay up front for advice and so advisers cannot make a living. When commission was paid those who wished to pay that way, like hire purchase,. were happy to get advice. Just imagine if HP was abolished and every one had to pay up front

  2. Speechless! how many times have we warned that this would be the effect wonder how much E&Y get paid by the FSA to tell them the obvious!
    RDR an unmitigated diisaster, destruction of IFA’s which was planned many years ago, the senior staff at the FSA PIA FIMBRA should all hang their heads in shame ….. will the last true IFA turn the lights off when you leave the country and a once proud profession.

  3. You can have credit for advice there is nothing in the rules stopping that!

    It just that Banks and Insurance companies can no longer make out it free.

  4. Not to worry.
    MAS is going to fill the GAP.

  5. “In any event the Sergeant Review throws down the gauntlet for life companies and we expect to see a positive reaction.”
    Is that a royal “We” Hatton or are E&Y part of the government now?
    Did you charge the FCA the % rate per drop in adviser numbers to come up with this report?
    Here is my prediction; if there are no more advisers to pay the FCA there will be less money from the FCA to E&Y and the other 3
    Now there is a result.

  6. My fear if true is the massive hike in my FCA/FSCS costs to compensate for the loss of income to these quangos. They either reduce their head count, increase fines our our fees!

  7. Hatton says the review “throws down the gauntlet” to the insurance industry.

    “In any event the Sergeant Review throws down the gauntlet for life companies and we expect to see a positive reaction.”

    Yes the gauntlet has well and truly been thrown down but down where? The bottomless pit?

    This positive reaction….. Is this based on wishful thinking or, are they seeing something I’m not? When people just trot out spin for spin’s sake and for their own agenda and purpose it just makes them look foolish. You decide?

  8. What you on about Herdy? Making no sense.

    Anyway, what we need is a Sergeant Review of the whole regulatory mob.

    Perhaps she’ll find simple regulators.

  9. The sad thing is that many views are polarised. There could have been and should be a middle ground between fee and factoring. Behavioural economics tells us that individuals do not like suffering losses. A fee, in some situations, is emotionally viewed as a loss. We can but hope that the FCA’s first lecture being on behavioural economics is a sign that they recognise this issue and work towards a middle ground.

  10. James Hurdman 3rd May 2013 at 8:37 am

    Wow. Stating the obvious and guessing, sorry, I mean predicting. Sounds like a tough job. I hope that the full document is more insightful.

    As for “simple life cover”, can someone please explain to me what’s complicated about the life cover already available?

  11. This number will fall much further. There is simply not enough HNW in the country to support a thrving advice industry. I suspect that it really is up to consumers at this point. It needs to be a grassroots effort and media job to make the regulatory bureaus to budge an inch. Once everyone with less than 100k are told your choice is a 2% Fixed Bond or figure it out online, I do believe we will see outcry.

  12. Dick Sprinkler 3rd May 2013 at 9:30 am

    Its hardly surprising that anybody takes a scrap of notice of what Peter Herd says given the forgoing.

    As far as E&Y predictions are concerned I wouldn’t be at all surprised – and Peter dont tell everyone that less means more because it doesnt its just means the market shrinks and the gaps grow.

    Market solutions work regulatory intereference doesnt RDR proves it and MMR will underscore it !

    A very famous saying ‘you cannot buck the market’ RDR has failed and MMR will

  13. “Our immediate reaction is that it will take some time for these products to gain traction and that simple life cover, if launched, could gain share most quickly.”

    Just how simple does life cover have to get?

    Your dead it pays out, your not it doesn’t!

    The regulator needs to stop messing around with the easy stuff that doesn’t need to be changed (there’s not much if anything wrong with the protection market) and deal with the important things such as availability of advice on pensions and investments.

  14. Peter the advice from banks was free you only paid if you went ahead with the business

  15. Retail DISTRUCTION Review.
    What an outstanding success

  16. I agree with ankn 2nd May 10.19 And whilst I don’t always agree with Peter Herd, his opinion is still valid SK I do wish anon and pseudo names wouldn’t criticise individuals willing to post under their own name. If you want to be critical, be a man or a woman and lost under your true name please. I do lost anon, but don’t have a GI at individuals when I do (as a rule)

  17. I for one am delighted with RDR. As an IFA for the past 20 years, Chartered & my practice is Chartered we have never been so busy! I sincerely hope that Level 6 will become the benchmark to trade within the next few years. Then we will be a profession on a par with Accountants & Solicitors.

  18. Biggles Flies Undone 7th May 2013 at 9:59 am

    The industry’s loss of advisers seems already to have passed the FSA’s 8 to 13% acceptable rate of attrition, as announced by Hector Sants when he appeared before the TSC in March 2011. Yet here we have E&Y predicting a further 3,000 or so likely to quit in this year alone.

    The original core requirements of the FSA’s RDR were a transition to CAR and the stipulation of a higher qualifications benchmark, with an estimated implementation cost of £600m. I think the industry could probably have coped with those two things without too much trouble. But the FSA just couldn’t leave it at that, having endlessly embellished and augmented those core requirements, so that now the implementation costs have ballooned to a stupendous £2.6Bn. It’s all the extra requirements and associated costs that are doing the damage. So the advice sector is contracting and those who remain are having to charge ever more for everything they do. Is it any wonder that an advice gap has developed and that people are either going without or trying to bodge it for themselves?

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