The RDR has prompted a lot of interest in and speculation about the growth of execution only investment and pensions business. As we begin the new year, will we start to see this trend start to change the recruitment market for financial advisers?
Last November, research from The Platforum revealed that 11.6 million of 14.1 million adults with risk based investments will make some or all of their investment decisions without advice. This month, Hargreaves Lansdown carried out a DIY Investor Survey revealing that 84.7 per cent of investors now make all or the majority of their financial decisions without taking advice.
This month also saw Hargreaves Lansdown launch its annual recruitment drive. The firm is taking on up to 60 graduates in order to prepare for the large demand from DIY investors looking to take advantage of the tax breaks in ISAs and Sipps before the end of the tax year, with up to a third of the intake offered a permanant role in the business.
With increasing client interest in non-advised and execution-only propositions, there is a question as to whether this will reduce the need for financial advisers in the future, or whether there will be an increase in employment within the execution-only sector.
Hargreaves Lansdown head of advice Danny Cox (pictured) says: “DIY investing is here to stay. It is going to be a growth area and there is going to be some kick-off benefit from the RDR in the sense that there is going to be a sub-section of clients who are no longer going to be attached to an adviser. They are going to be looking to do things themselves.”
However, Cox says regardless of the RDR, DIY investing has been growing for many years. “There are all the tools and information you need out there to be able to make decisions through online services such as ourselves, so the RDR is accelerating that but that trend was there already,” he says.
Keillar Resourcing managing director Harris Keillar says his firm has seen a large increase in financial advisers looking to leave the industry or looking for employment in financial services in other countries due to the RDR and says financial advisers that are trading on the basis of providing investment adivce alone could struggle.
He believes execution-only will see an increase in DIY investors because of the availability to consumers and the fact consumers are more aware of the areas they need advice on. “I think with the likes of Hargreaves Lansdown and Bestinvest, they have so many tools available to people.
“If all you are doing is doing investment advice, that is not going to be a runner. You might have phenomenal qualifications. You can do all this research yourself but it is somebody else’s guess. If, however, you are helping people with regards to pensions, that people will pay for. This advice is not something that you can get from the internet.”
Chapters Financial currently runs an online advice service alongside its face-to-face advice service called AdviceMadeSimple. Director Keith Churchouse (pictured) believes execution-only and non-advised services will encourage younger blood in to the industry and says if his online advice service continues to grow as it has done recently, he would consider hiring extra staff to deal with that side of the business.
He says: “Taking on graduates is an excellent idea and from that point of view I actually forecast that the average age of the individual working in the industry providing advice and within execution-only services will fall significantly and it is probably about time that happened. That is likely to have the effect of making our business more dynamic and that has got to be good news.”
Cavendish Online, a small execution-only financial services broker, has seen an increase in interest in its site as a result of the RDR and is looking to take on two extra staff members to help with demand.
Cavendish Online managing director Ian Williams says: “We have seen more growth on the back of the RDR. From our point of view, most of the companies we deal with see online systems as their main gross area of business over the coming five years.”
Williams says although he believes there will be heightened interest and employment within the execution-only area, this is not without concerns. He says: “Obviously one of the problems from an employment point of view is the fact that it takes far fewer employees to service clients via a website when clients are going online and doing it themselves.”
Plan Money director Peter Chadborn (pictured) believes non-advised and execution-only propositions won’t necessarily attract employees or apprentices who are interested particularly in financial services.
Chadborn says: “I think for people who have an aspiration to get in to financial services, it’s generally based around advice and the ability to actually help people and play their part in that process and non-advised doesn’t support that. I think the kind of people it will attract will be those who are looking for office based jobs anyway. Whether that is in the financial services or not won’t make any difference.”