Financial reforms failing? Think again

The carnage predicted by opponents of financial reform is greatly exaggerated if recently released statistics are taken at face value

The Financial Conduct Authority announced this week that there are 22,557 financial advisors in the UK doing business for a total of 4,504 firms. That’s up 5% year-over-year and 10% higher than the numbers that existed just prior to the Retail Distribution Review being launched in 2013.

The great exodus predicted by reform opponents doesn’t appear to have come to pass.

David Thompson is managing director of business development and proposition at AXA Wealth. In a recent column for Professional Adviser magazine he suggested there is one advisor for every 2,900 people in the UK compared to 1,400 in the U.S. and 1,900 in Canada.

He believes the lack of advisors has less to do with RDR and more to do fewer people choosing financial planning as a career.

“While services like Money Advice Service and Pension Wise have helped to raise awareness of financial advice, more needs to be done to actively encourage school and university leavers to consider a job as a financial adviser,” wrote Thomson in Professional Adviser. “Whether that's through academy type initiatives or apprentice schemes, we all have a role to play to increase numbers. Otherwise we run the risk that people will go looking for advisers and there's going to be no one there to answer the call.”

This hypothesis makes a lot of sense. Especially when you consider the veracity of the numbers put forth from industry representatives.

In the summer of 2012, RS Consulting estimated the number of advisors in the UK was almost 24,000, 6% less than exist today but the numbers from the FCA don’t jive with those from RS Consulting.

Here’s why.

If both groups’ numbers are to be believed the advisor population in the UK dropped by 14% or 3,334 people in just six short months leading up to the launch of RDR in January 2013. While that’s plausible, it’s not very likely.

Not to mention the FCA still doesn’t have an accurate count of all the professionals providing advice in the UK at the moment. The FCA’s most recent estimate of retail financial investment advisors totals 30,600, down 2% from this time last year. There exists an 8,043-person gap that includes those working in banks, building societies and discretionary investment managers.

Until the FCA firms up its numbers it’s hardly an argument to stand behind.

One solution would be to require this information within the Retail Mediation Activities Return which advisors provide to the FCA highlighting the specifics of their business much like the Form ADV advisors in the U.S. file with the SEC and state securities authorities.