Although often mocked, British journalism is the home of many fine habits, passed on through the generations. It has its own rites and rituals, with the same types of stories making guest appearances every year.
We all know about the “first cuckoo of spring” letters, not to mention perennial “hell in a handcart” columns, complaining about the disappearance of yet another fine old-fashioned social tradition – like the right to horsewhip your personal servants.
And I personally recall being on duty in one newspaper office on Boxing Day and driving to a turkey farm for a story whose opening sentence miraculously re-wrote itself every year: “Meet Lucky: the one that got away…”
What I had not quite expected, or at least not so soon after the RDR came into force, was a “handcart column” in Money Marketing telling us how its introduction had led to a collapse in intermediary numbers.
Clearly I was naïve – as I type this I can picture scores of readers happily nodding their heads in agreement in that regard.
But a fortnight ago, just like all other “handcart” articles – and barely seven weeks since the January deadline – an article appeared in the paper, blaming the decline in intermediary numbers since 2007 on the point at which “the RDR horror first gained traction and clawed its way from madcap theory to sadistic reality.”
For the few whose whose self-admitted failure to present a decent business case in favour of fee-based work to their clients, it is understandable that the RDR can cause such dread and they were already quaking in their boots six years ago.
As it turns out, research published by Mintel in December last year partially bears out this assertion. The number of directly authorised financial advice firms fell from 5,501 in September 2008 to 5,123 five years later.
But to blame the decline in financial adviser numbers since 2007 on the RDR strikes me as a bit rich. Can it really be the case that the fall in RIs over the past six years is all the fault of the RDR? Were financial advisers really saying back in, say, January 2008: “That’s it, I can’t believe what they will be doing in five years’ time, I’m off out of it now.”? Somehow, I find that hard to believe.
Apart from anything else, it ignores the huge decline in intermediary numbers from the late 1980s to the present day. Back then the industry could boast up to 250,000 RIs, yet many of them had not actually been advising anyone for years.
My guess is that other factors, such as the state of the economy and its impact on different sectors of retail financial services, have had a far larger influence on DA numbers.
A clear example of that comes from the Mintel survey quoted earlier: the number of mortgage advisers dropped from 3,090 to 1,394 over the same period. Similarly, the number of general insurance intermediaries also fell sharply, from 7,278 to 5,839, caught by the continuing dual squeeze of online insurance sales and web-based comparison sites.
So how should we view the fact that, as was reported in another paper recently, Matrix Solutions’s research recently found the numbers of regulated financial advisers – of all types, it should be noted, not just IFAs – fell by 15.4 per cent in the three months between November 2012 and February 2013?
It is clear there are several causes for this fall: one of them is that the RDR has had a disproportionate effect on sections of the banks’ advisory operations. This should, in theory, give IFAs a better opportunity to shine in a market where more people are looking for a quality advisory offering.
Another factor is natural wastage. Every year, people retire or leave the industry and the last few months will have been no exception.
It is undeniably true that there will be a significant proportion who will have taken the RDR’s introduction as the signal for them to bring forward their departure.
Indeed, I recall a fair number of comments to that effect in the last couple of years, with people saying they might have stayed for a year or two more but couldn’t face the aggravation of “re-inventing” themselves for the new regime.
Finally, as in the 1990s, there will be many people who had long retained RI status even though they now were essentially managers of their firms and only gave advice to a handful of long-term clients.
So, barely two months into the brave new world, what is the true picture for IFAs?
Some will undeniably find it tough. As Mintel’s research put it: “Those that exit from this point on will be advisers who have not prepared adequately and who are unable to compete either on service level or on a profitability basis.”
But Mintel also found that while 48 per cent of intermediaries were concerned about the negative impact of the RDR, 51 per cent felt it would either be positive or have no impact on their work.
There are times when, instead of bringing out the handcart right away, it might make more sense to stop and see how things develop further down the line. There could be stuff to write about that surprises all of us.
Nic Cicutti can be contacted at firstname.lastname@example.org