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PwC warns poor financial regulation will hit jobs and advice availability

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A well regulated financial services sector could see over 250,000 new jobs created by 2020 but current regulatory reform is restricting financial advice and product availability, according PricewaterhouseCoopers analysis.

In a report published today, PwC said a financial services sector which was well regulated would also add about 2-3 per cent GDP growth by 2020 with 47,000 new financial services jobs and around 218,000 in the wider economy. 

However, it says poorly regulated financial services sector combined with poor economic growth would mean only an additional 12,000 jobs would be created by 2020 and a much smaller rise in GDP of just 0.2 per cent would be seen.

PwC UK financial services leader Kevin Burrows warns “many aspects of financial services reform are currently constraining the advice and products financial services institutions can offer to customers”, making competition improvements in the sector difficult to achieve.

He adds: “Our analysis suggests that the links between the financial services sector and other sectors across the UK economy are strong.

“This shows the important contribution the sector makes to the UK economy across all regions, but also highlights the profound effect that financial services regulation or changes in financial services performance can have on non-financial services business.”

PwC economists based their analysis on two scenarios designed to represent the potential future path of financial services in the UK.

In the first scenario it was assumed that there was a “robust regulatory regime that facilitates financial services sector growth”, with “economic conditions that are also beneficial to the FS sector”.

The second scenario assumes the financial services sector is “constrained by weaker economic conditions”, as well as a regulatory environment that “does less to facilitate growth” than in scenario one.

Of the potential 265,000 new jobs that could be created if scenario one comes to pass, PwC expects around 132,800 to be based in London, with a further 24,000 in the South East.

The areas to benefit the most by new job creation outside of London are the North West and South West, with 19,400 and 16,800 new jobs created by 2020, respectively.

However, the North East, Scotland, Wales and Northern Ireland are unlikely to benefit to the same extent, according to PwC, with just 4,800, 7,200, 5,200 and 2,900 jobs created by 2020, respectively.

In March, Money Marketing revealed the number of IFAs and tied advisers operating on the first day of the RDR was 20 per cent down on December 2011 figures while the number of bank advisers fell 44 per cent. The total number of retail investment advisers fell 23 per cent from the 40,566 estimated by the FSA at the end of 2011 to 31,132 at the end of 2012, the first day of the RDR.

FSA estimates suggest there were 25,616 IFAs, tied and multi-tied advisers in December 2011, of which 21,696 were IFAs. This fell 20 per cent to an equivalent 20,453 advisers after the RDR deadline. The FSA is unable to give a split for IFAs.

The number of bank and building society advisers fell by 44 per cent from an estimated 8,658 in 2011 to 4,809 post-RDR. Since these figures were revealed, Santander, Axa and Aviva all announced they were scrapping their advice arms.

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Comments

There are 12 comments at the moment, we would love to hear your opinion too.

  1. Nicholas Pleasure 22nd July 2013 at 9:04 am

    It astounds me that this has been allowed to happen. Imagine the outcry if regulation meant that 23% of car workers lost their jobs.

    The government would do well to listen to PWC. The current regulatory regime is strangling the regulated and harming the wider economy.

    There will be little chance of cutting the welfare bill if those with money are not encouraged to provide for themselves.

    Why is it roughly 100 times easier to apply for a loan than make an investment?

  2. Soren Lorenson 22nd July 2013 at 9:08 am

    Let’s not allow the Government to suggest that the FCA is any different from the FSA. Wheatley has shown that he is no better than Hector and pretty much has his snout equally as deep in the trough.

    Regulation needs reform from outside of the regulators. Maybe an industry elected oversight panel would be workable. No-one in our industry wants to see cowboys allowed to flourish, but we all want reasonable, proportionate regulation that allows legitimate business to flourish, whilst protecting consumers.

  3. Why does it take 15 minutes to take out a 3600% ape loan and 3 hours to take out an advised £50 per month equity ISA.
    Why is the loan industry booming and regular savings investment has dried up
    3 reasons; regulation, regulation and more regulation

  4. Why does the FCA not know how many IFA’s there are ?
    Surely if you dont know how many how can you compile any meaningful stats, or even know who you are regulating ?

  5. To put it another way – Poor regulation has cost jobs in the FS sector and constrained advice.

    The regulation gravy train rolls on – now going to have to pay another fee to the FCA when they take over the Consumer Credit Licence regulation from the OFT. Note to Mr Wheatley why are we paying again and why isn’t the same fee for everyone?

  6. @ anon 9.17

    Simple really, the government what people to spend not save
    They don’t give a toss about the ramifications that this will cause the people, who are having to borrow to survive, let alone try and put something aside for a rainy day
    Its an easy way to shackle people to a monster that will always have to feed it and never satisfy its hunger

  7. What we require is consistency as the FCA only seems to regulate half of financial services. It doesn’t seem to be a level playing field as the FSA have created a complicated set of rules and regulations for authorised individuals to follow while exempting half the industry under unauthorised products and services. The trouble is the FCA is taking no action to correct this imbalance even though many IFA’s continue to point out how unfair this all is.

    Is it no wonder why we have seen a massive decline in financial adviser numbers when half those that have been authorised are now providing services without holding authorisation.

    Pension liberation is a good example of this after all most of the firms offer this type of service hold no authorisation at all. How can anybody give advice on pensions without holding authorisation surely those giving advice on pension liberation are breaking basic regulations under FSMA 2000 and 2012.

    Until the FCA has a consistent approach to authorisation that treats all sectors with the same rulebook we will continue to have confused regulation.

    The FCA also needs to publicise the authorised register, as surely the only individuals that are allowed to give advice are those individuals that appear on its.

    Why are we continually getting stories from PWC and the other major three accountancy firms as if their opinion really matters. After all haven’t they been caught giving some terrible advice to banks, governments and other organisations, so why should we take any notice of them now.

    Last thing, we don’t need new rules we don’t even need new structures we just need to enforce authorisation rules. If that was done it would give authorised individuals the confidence to expand their practices to meet the advice gap. Until this is done no major advice company is going to spend millions of pounds expanding practices and training staff only to have all of that work undone by a regulator that seems to be out of touch with the industry.

  8. man on the moon 22nd July 2013 at 10:57 am

    The payday lenders are the friends of government as they finance many who are in dire straits whilst we forge ahead to prosperity! (readers of the Daily Mail may disagree)

    One Newcastle player has more integrity than those who regulate the crazy % interest rate Lenders.

    We spend our time watching the unaccountable regulators shooting up the whole sector rather than actually forging the way ahead with good practice initiatives.

    All for regulation that is accountable and effective.

  9. I agree with anon at 09.17.

    It should not take 15 minutes to take out a high APR payday loan and well over 3 hours to set up a £50 per month ISA.

    Regulation is killing savings and pensions and all the FCA can think of is to regulate it even further.

    There needs to be less regulation to encourage the industry to flourish.

  10. @man on the moon

    “One Newcastle player has more integrity than those who regulate the crazy % interest rate Lenders.”

    Not a great example, that same Newcastle player who has stated that his religion doesn’t allow him to wear a shirt with ‘Wonga’ printed on the front has recently been pictured in the local casino. I’m sure he has no problem with the clubs sponser, he just wants out. Nothing to do with integrity.

  11. Julian Stevens 22nd July 2013 at 7:08 pm

    “The Regulators’ Compliance Code is a central part of the Government’s better regulation agenda. Its aim is to embed a risk-based, proportionate and targeted approach to regulatory inspection and enforcement among the regulators it applies to.

    Our expectation is that as regulators integrate the Code’s standards into their regulatory culture and processes, they will become more efficient and effective in their work. They will be able to use their resources in a way that gets the most value out of the effort that they make, whilst delivering significant benefits to low risk and compliant businesses through better-focused inspection activity, increased use of advice for businesses, and lower compliance costs.”

    Given the FSA’s wilful and continuing disregard for the Code, the only solution is the creation of an Independent Regulatory Oversight Committee with the unassailable authority to say the the FSA This is wrong and you aren’t going to do it.

    Why aren’t APFA and indeed the PFA directing every ounce of their energies towards this objective? Anything less is just picking at bits of the problem.

  12. Making Money Through Blog 23rd July 2013 at 3:28 pm

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