The expensive consults Aviva have paid to predict the future suggest that IFA numbers will fall by more than half by 2013 due to the changes expected to be part of the final RDR proposals.
Conveniently enough, Aviva believes this will allow it to grow a direct-sales channel to prosper in the provision gap that would be left by such a fall. The firm will also be targeting 1.4 million of its orphan clients which it believes are not being serviced by IFAs.
Last week, Legal & General also announced it was looking to grow its tied salesforce in preparation for a reshaping of the market which it believes will lead to a significant shrinking of the IFA population.
Examining these proposals triggers memories of the ABI’s controversial original draft proposals for RDR, a document brimming with ideas to try and cut IFA numbers and making no secret of the trade body’s jealousy of IFAs’ distribution domination.
Providers should be gearing up their strategies for the fundamental changes that will be implemented as part of the review but we caution them against the confidence with which they predict the decimation of adviser numbers.
As it stands, the RDR, in conjunction with prudential rules changes and the current economic crisis, will ask very difficult questions of many adviser firms but this newspaper is still hopeful that pragmatic solutions could be found around issues such as qualifications and capital adequacy to guard against the inevitable damage that will be done to consumers by a cull of IFA numbers of the size expected by Aviva.
As Friends Provident chief executive Trevor Matthews pointed out last week, the IFA sector has proved hugely adaptable in the past and we believe that it will be so again.
There are plenty of good news stories to be told about the current IFA market. If the RDR proposals are implemented sensibly and with prioritisation given to consumer rather than industry interests, we are likely to see a big increase in young IFAs coming into the market.
When drawing up plans for the future shape of distribution, providers should be careful what they wish for. Avoiding a cull of IFAs will be good news for consumers and good news for the industry as a whole.