New estimates from the financial services regulator suggest nine in every ten advisers practising today will meet all the requirements set out in the Retail Distribution Review (RDR) by the end of next year.
Based on an as-yet-unpublished survey assessing the current status and intentions of more than 1,000 individuals, the FSA said it expects 91% of advisers to remain in the industry and continue to see clients.
The figures are significantly more positive than those published elsewhere and also suggest a shift in momentum since the last time the regulator conducted a similar poll in 2010.
Last year, the FSA said as much as 18% of the industry intends to leave the market as a result of the RDR’s requirements, including those on qualifications.
However, its latest figures found just 5% of advisers do not intend to reach the new qualification level, largely due to their intention to retire, leave the industry or stop advising on retail investment products.
A further 2% intend to qualify, but do not know when they will complete their qualification, the FSA said, while another 2% have either not given any consideration to taking an appropriate qualification or have not made a firm decision on whether to do so.
However, advisers said they were unsure what to make of the FSA’s findings.
Michael Fallas of Focus IFA in Buckinghamshire, said the figures were meaningless because the real impact of the RDR will only be felt after the rules have come into force.
“This sort of justification is typical of the FSA,” he said. “The question is will consumers accept the effects of RDR and be prepared to pay fees or fees deducted from the product at a level that makes the business worthwhile?
“If not then 2014/15 could see many leaving the industry, qualifications or not.”
The FSA’s figures were published in an attempt to rebuff MPs’ concerns about the extent of potential exits from the sector.
Members of the Treasury Select Committee (TSC) reviewed the impact of the RDR over the summer and recommended that the FSA delay implementation of the rule change by 12 months, over fears consumers would be left unable to access advice due to an adviser exodus.
But in its formal response to the TSC last weekend, the FSA said adviser preparedness was high.
Its response states: “We share the committee’s concern about the impact of the RDR on the availability of advice and the extent of potential exits from the sector, particularly by independent financial advisers, as a result of the qualification requirements.
“We have carefully considered the option of delaying the RDR in order to allow advisers more time to qualify. The evidence from our latest survey is that…at summer 2011, 91% of retail investment advisers are either already qualified or expect to qualify by December 2012 with another 1% expecting to qualify after the end of 2012.”
RDR exit ‘guesstimates’
Openwork (July 2011)
Schroders (Dec 2010)
Suuqea (March 2009)
FSA promises to educate public on RDR
The FSA said it intends to roll out a “consumer communications plan” to help ensure the public is aware of the Retail Distribution Review (RDR) and its impact on the delivery of financial advice.
It plans to act on a suggestion from the House of Commons Treasury Committee to provide resources to explain the changes to the public.
In particular, the committee said the fact ‘restricted advice’ may mean restricted by product or by firm required communication.
In its response to the committee’s recommendations, the FSA said: “We intend to roll out a consumer communications plan. We will work closely with relevant consumer bodies ahead of RDR implementation to communicate the changes.
“Advisers will also need to let their clients know how the changes will affect them and we will be working closely with the Money Advice Service as well.”