Having just hung up the phone to yet another researcher wanting to know how the impending RDR and Solvency II introductions will affect IFAs (subjects covered by countless column inches), I was happy to see the launch of Pave the Way to Save – a fresh initiative led by Money Marketing. It is one of the most sensible compliance campaigns for a while.
As an industry, we appear to be for ever on the back foot, waiting for the regulator of the day to issue a consultation document or policy statement on one matter or another, then, upon receipt, we respond or complain to the press. This initiative is different, as it is a proactive approach.
With the endorsement of the Association of Independent Financial Advisers and other trade bodies with access to Government at the right levels, it should spark some open debate. This will hopefully result in securing Pave the Way to Save’s desired outcome, which is to give the new financial services regulator an additional statutory objective to increase savings and protection take-up in the UK.
The UK life insurance protection gap – the difference between the amount of life cover people hold and the amount they need – is calculated by Swiss Re as being £2.3tn sum assured. In context, this means one in two UK adults has an average personal protection gap of around £100,000. The income protection gap is estimated to be £190bn. The Association of British Insurers calculates the annual savings gap as being £27bn.
Ways of reducing the gaps include commoditising all simple life products, then selling the products via the internet. In addition, there need to be more financial advisers who are able to provide advice on savings and the more complex protection policies, such as critical illness and personal health insurance. But will there be enough advisers following the RDR?
Ernst & Young predicts IFA numbers will fall to 10,000 by the end of 2012 due to many factors, including the RDR and Solvency II. I do not feel this will be the case as the attractiveness of becoming an IFA in these difficult economic times is increasing. It is not just because of traditional life, investment and pension financial planning opportunities. Future business opportunities to provide advice on pension auto-enrolment (if it is introduced) is huge, as are other unexpected financial issues.
One such example is illustrated by the fact that I have been contacted by dozens of people who are scared due to HM Revenue & Customs’ PAYE tax code blunder. The mistake affects nearly six million taxpayers, with billions of pounds of tax paid to HMRC incorrectly, which may need to be refunded. Over a million people will have to pay HMRC after underpayment of income tax, averaging at more than £1,000. Financial advisers can offer valuable tax advice here, without clients needing to visit an accountant.
Now is the time for the IFA profession to really raise its public awareness about the services offered, with an explanation that no other financial adviser offers whole-of-market advice and works on behalf of the client.
Kim North is director of Technology & Technical