The Dunstan Thomas Adviser and Provider Survey 2013 - Adviser Results
27th April 2013
RDR has divided IFA market between those struggling to replace disappearing commission income and a smaller group pushing for growth post RDR
Retaining clients is the top priority for IFAs post RDR according to a wide ranging survey of the adviser community completed last month by retirement solutions provider Dunstan Thomas. More than a third of advisers (36.3%) signaled that client retention was their chief priority in 2013, while an even larger number (41.4%) are focused simply on ‘making enough money via fees to replace commission income streams as they disappear’. A fifth of advisers (19%) consider client acquisition their key priority right now.
A fifth (19%) of the sample is focused on acquiring new clients, while some 15% are concentrating on communicating RDR-linked changes to clients (presumably with a view to retaining them). A tiny minority of just 2.11% are focusing energies on acquiring other adviser firms today.
When asked about their experiences leading up to RDR in 2012 the IFA-dominated audience was split. Well over a quarter (27.4%) saw it as ‘the toughest period of their professional life’, and 18% admitted that RDR had forced them to change direction in a way in which their income fell. However nearly as many as these two combined groups – 39.7% indicated that RDR hastened no real changes in working practices as the firm they worked within ‘has always operated in a RDR-ready manner’.
When asked to give their verdict on FSA-directed market changes IFAs were understandably critical in some key areas. For example nearly two thirds (63%) said that the FSA’s assertion that ‘selection of a single platform for most of an IFA firm’s clients was likely to have a negative impact for their customers’ was wrong. Nearly three quarters (73.5%) said the IFA blanket ban on commissions and rebates linked to products was a mistake. Still more (77.7%) determined that the FSA’s definition of Independent versus Restricted Advice was incorrect.
However IFAs gave a ‘thumbs up’ for both unbundling of charges (backed by 59%) and compulsory introduction of Reduction in Yield calculations which show the impact of charges on product performance illustrations (supported by 57%).
When asked where IFAs felt growth was most likely to come from in 2013, one fifth and the largest portion, said that it expected it to flow from a strategy of deepening expertise in a particular area of the market. A significant group (16%) expects it to come from deployment of new technology to reach more clients and prospects more regularly. Linked to this and the trend towards migration of assets onto platform, just over 10.5% will be using Centralised Investment Propositions to service their segmented client-bases more effectively. Nearly a tenth of IFAs (8.5%) are planning to capitalise on the capped and flexible drawdown market opportunities. Others are diversifying into new product specialisms to get ahead.
Advisers also gave their views on platform providers. Real-time valuations, online transactional capability and provision of a good selection of risk profiling, portfolio planning and re-balancing tools, were judged to be essential or very important by the vast majority of adviser firms (89%, 87% and 73% respectively).
Stronger integration with a wider range of back office technology systems was also essential or very important for nearly two-thirds of respondents (64%). This is proving a key challenge for platforms as they bring more tax wrappers and products onto platform. Nearly 62% indicated that more customer segmentation and analysis tools are a critical platform selection criterion.
IFAs also want to see more annuity products on platform this year, according to 48% of them. Nearly as many (37.8%) are looking for more ETFs and are surprisingly large sample (34.5%) are now looking for more Long Term Care products as the post-retirement market becomes the focus of advice for more firms.
Statistics provided by the FSA on 28th March indicate that some 5,163 financial advisers have deregistered in the last year running up to RDR. The majority of IFA firms’ own prediction was lower in Dunstan Thomas’ survey – 35% of respondents thought 2,000 would leave and 33% estimated 4,000 would go. FSA figures indicate that about 20% advisers have already left the advice market. Interesting, just over 15% of the advisers surveyed admitted to changing their status in the last two years as a result of RDR.
Chris Read, chief executive, Dunstan Thomas, commented on the findings: “Adviser firms’ capacity for survival and the range of strategies they have come up with for finding growth; so soon after the largest regulatory change to be forced on the retail financial advice world since polarisation in 1987; is impressive. But as Sir Hector Sants, former chief executive of the FSA, predicted three years ago RDR has taken 20% of IFAs out of the market altogether and forced many retail banks to pull out of the financial advice world altogether.
“The economic pressures created by Adviser Charging inevitably mean that larger firms and early adopters of wrap platforms will weather the storm most quickly and effectively as they take advantage of an increasing array of front office tools integrated with back office systems which take the sweat out of portfolio selection and product administration, thus keeping ‘costs to serve’ down.”
Benedict Anderton, director, Grosvenor Wealth Management, commented on the findings: “For IFA firms that saw the potential impact of RDR and began planning for it several years ago, the opportunities for growth post RDR are clear. But what this survey shows is that there are many IFAs that have not yet adjusted to Adviser Charging post RDR. Firms that cannot organise themselves into teams with deep pools of expertise; and then package and demonstrate the value of that advice; while taking advantage of new technologies to reduce administrative workloads; will inevitably find it tougher post RDR.”
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