IFA culls predicted in wake of Retail Distribution Review

The number of IFAs in the UK will shrink as a direct result of the implementation of the Retail Distribution Review (RDR), according to senior insurance executives attending a debate hosted by Watson Wyatt.

Some 30 per cent of the audience said IFA numbers will fall by more than 25 per cent over the next five years, including 7 per cent of attendees who believe their numbers will be cut by over half. Nearly half, 47 per cent, said they would decrease by up to 25 per cent.

Three-quarters of the 50-strong audience said the RDR will not provide consumers with a clearer understanding of how they can access financial services products, while two-thirds said the RDR will have either no impact or a negative impact on consumer uptake of financial services products. At the same time, a majority of attendees, 57 per cent, said they believe the cost of advice to consumers would increase as a result of implementing the RDR.

A majority of the audience at the debate were in favour of the main motion that ‘this house believes that regulatory restructuring of distribution will not increase consumer uptake of financial services products’. However, some people changed their minds during the debate and agreed that regulatory restructuring of distribution will increase consumer uptake. The votes were split 86 per cent to 14 per cent before the debate, with the post-debate votes split 68 per cent to 32 per cent.

Proposing the motion were Chris Cummings, director general of the Association of Independent Financial Advisers and Stuart Tragheim, director of distribution strategy & business development for LV=. The opposers were Mick McAteer, director at The Financial Inclusion Centre and Alex Roy, assistant director for distribution reform at the Association of British Insurers.

“To many in the industry the FSA’s feedback statement of last November was a fudge, blurring the lines between sales and advice, while to others it showed that the FSA had kept its consumer focus by offering a number of routes to market,” said Sarah Luheshi, a senior consultant at Watson Wyatt. “Most people in the industry do not believe consumers will gain a better understanding of how they can access financial services products because of the changes proposed in the RDR, nor do they believe that consumer uptake will increase. The great concern is that the RDR involves significant costs but with no or little benefit to the industry or its customers. It appears that the RDR will not achieve the goal of bringing financial advice to a wider market.”