11th May 2021

More Good News from the Front

Just before Easter, the IFAA issued a short survey on the impact of COVID and other issues. This will help us when we design of The Heath Report 4 survey which I hope to issue this June. Thanks to all who joined in, We had a great response and as a result we are still crunching numbers. However, we can rely on the responses to some of the more statistical questions now.

COVID has been leading every news cycle for a year and just like any organisation desperate to be noticed the FCA has been issuing all sorts of stuff; most of which were for the benefit of the sender rather than the recipient. As one of my members recently commented they already have Gabriel reports, why they are bothering us again. The answer is a frantic need to be relevant and ideally down with the kids. As we emerge from this nudge driven lockdown what have we learnt? 

Firstly, throughout the lockdown the vast majority of advisers have continued to trade, advise clients, and do their job. As a result, turnover for 78% of our responding firms is the same or better. 22% have had issues. But turnover is for vanity, it is profit you need for sanity, so how is profitability looking? 73% OK with 27% worse. So much of the same.

The exception are the larger companies. If you have more between 5 – 9 advisers, you may be doubting your sanity. We did not have enough responses from 10 or more adviser firms to take a view, but I would be astonished if their profitability has improved from their normal flaccid levels. 

This presents the FCA’s policy wonks with a bit of a problem. The current regulatory fashion is currently to be keen on DA firms joining networks. Their position with this is very much a pendulum which has been swinging backwards and forwards for decades. This week it is pro big advisory firms, next week they will become the devil incarnate and a rather potless devil at that. Remember to duck when it happens.

So, is the advisory sector as robust as historically we have been seen to be? 

Well yes, but in business terms we have an increasing issue. Advisers have always been robust because they have avoided every ounce of fixed overhead. They have avoided the cost of heavy IT systems and even trade association fees!!! This allows advisers room for manoeuvre. By the time large FS players get around to change, advisers have been in the new market for 3 years.

As often the comments that are attached to the raw data hold the real treasure. One respondent suggested "At some point the juice will not be worth the squeeze".

One very apparent result is that even after decades of expensive regulation there are still major issues. The rather glib suggestion that “polluters must pay” is a poor argument. Demonstrably the existing advisers or more accurately their clients haven’t polluted and given that these failures are a failure of regulation may be the cost should be covered by FCA staff.

For the next 5 years advisers face a heavy overhead emanating from the FSCS. This bill is going to be in over 10% for the next decade unless we can spread the load; those in the 27% may be exiting the sector which in turn increases the FSCS costs by an additional 27%. We are not out of the woods yet.

That said we have good news on the horizon. The MP’s campaign is working, and I understand that both politicians and civil servants are emerging from underneath their stones and are now taking responsibility. Cannot say anything yet but great news is on its way.

To donate the "Make Advice Affordable Campaign Keep Advice Affordable

Or you could join us for £20pm Join Us

If your MP has not been approached by you go to Letter and Guide here

Regulation