Or so we might conclude from a recent report from the Association of Professional Financial Advisers (APFA), which says that numbers in the industry are falling away sharply. (www.apfa.net/policy/financial-adviser-market) As of 31 December 2012, it seems, there were only 20,453 individuals who described themselves principally as ‘financial advisers’ – down from 26,339 in December 2010 and just 23,865 at the close of 2011.
Hmmm, that would represent a 22.4% decrease in two years. But if you think that’s worrying, APFA says that the total number of financial advisers holding investment permissions (i.e. a wider category, including other industry professionals) fell by 30.1% during those same two years, from 44,556 to just 31,132.
Of these, APFA says, 20,453 were advisers in the conventional sense, while another 4,809 were bank or building society advisers, 2,043 were stockbrokers, 1,435 were discretionary investment managers, and another 2,270 comprised what were termed “other firms”. There were 122 waivers.
APFA director general Chris Hannant says that the Financial Conduct Authority (FCA) needs to take this shrinkage into account when deciding what fees to charge the industry in future years.
“The drop in advisers since 2012 has been around a quarter,” he said yesterday. “The fall is a significant point, because we want to ensure that the FCA takes the fall into account when it calculates future fees for the industry. The new, smaller market cannot be expected to shoulder the same financial burden it did when it was much larger.”
“It is vital the amount the FCA asks from advisers is fair and proportionate. Armed with these new statistics, we will continue to press the FCA to ensure that becomes a reality.”
How To Interpret Those Figures?
On the face of it, the APFA’s figures seem to confirm the old FSA’s expectations that upwards of a quarter of the IFA sector would quit the industry after RDR. But does the recent decline really mean that the industry is shrinking? Or that it’s evolving away from products and moving toward planning and similar activities instead?
We’re already seeing a massive increase in the uptake of Chartered Planner qualifications. And shouldn’t we also take into account the equally proven fact that advisers are placing far more of their investment business with discretionary fund managers while they switch to more profitable activities?
In short, the situation isn’t what it seems to be. Or is it? Tell us what you think.