There was much speculation in the lead-up to the implementation of the RDR about how much the adviser market would contract as individuals decided the new regime wasn’t for them. A recent survey published by the FSA has confirmed the theory has become reality.
According to the regulator, from a sample of 1,438 advisers, one in 10 advisers left financial services in the 12 months up to the summer of 2012. In addition to the number of departures, the poll also ascertained what stage of qualification advisers were at. As of December 2012, 93% of advisers held a Level Four diploma, 2% were awaiting results and 2% were still studying, leaving 3% not taking the appropriate qualifications. Presumably these individuals are soon to be added to the one in 10 figure unless they have a change of heart.
The net result of all this is much merger and acquisition activity in the past year or so and – as I pointed out in my last column – the beginning of a new year and the start of a new era hasn’t changed this. We have continued to see a raft of acquisition announcements into February and while most of the groundwork for such deals will have been laid in 2012, we know first-hand that there continues to be a steady stream of vendors to the market.
Some might expect businesses to wait until the summer at least before executing any such exit strategy, but this may not necessarily be the case. Many market commentators have already made their predictions for the coming year, with Scottish Widows’ head of distribution Robert Kerr already on the record with his expectation that 15% of advisers will leave the market in 2013. His claims are based on the fact that some advisers will opt out of getting the necessary qualifications but will remain as introducers, some will have clients who won’t get on board with the idea of paying a fee and others will find they aren’t able to generate the income they previously did by switching clients from one provider to another.
There will also be those who are looking to stay in the market, but come under the umbrella of a national group such as Perspective and our door remains open to firms who decide this is the best course of action. Maintaining the individuality of an existing brand while taking advantage of the support and economies of scale a national group can afford is only likely to become a more attractive option as time goes on and regulatory requirements become ever more onerous.
The FSA intends to follow-up its adviser departure survey with a more detailed report as well as conducting further studies on professionalism in the summer. The regulator is also aiming to monitor adviser behaviour and attitudes on other aspects of the RDR and related topics in the future. As well as providing an interesting anecdotal snapshot of the advice market, any such data will be useful for those tasked with managing and valuing future acquisitions.
David Hesketh is group M&A director at Perspective Financial Group