The number of independent financial advisers has steadily increased every year since the introduction of the retail distribution review (RDR) in 2013.
But a Freedom of Information (FOI) request to the Financial Conduct Authority (FCA) revealed that, in 2019, the number of IFAs was in slight decline for the first time.
Restricted advisers have been showing the opposite trend, as numbers picked up over the last couple for years after falling steadily between 2013 and 2017.
Source: Financial Conduct Authority
The FCA said that the figures are not fully representative of the current situation, however.
This is because some advice firms have both independent and restricted advisers, and they do not have to report which advisers fall in which category.
“As 2013 is the first year of collecting the breakdown of the categories of advice, some firms will have not provided this, depending on the reporting period when completing their submission,” the regulator said.
“The data for restricted between 2013 and 2016 was split between ‘multi-tied’, ‘single-tied’ and ‘limited’ and have therefore all been grouped as ‘restricted’ for the purposes of this request.”
Andy Thompson, chief executive of Quilter Financial Planning, told International Adviser that the growing overall number of advisers is to be celebrated, and that it is a sign of the value financial advice can add to people’s finances.
“From 2010 until 2017 we saw a dramatic drop in the number of advisers in the sector, indeed the FCA figures show a drop of almost a third.
“The fact that we are beginning to see a turnaround and for the past two years we’ve seen increases should be celebrated. Many players within the sector, including Quilter, have made a concerted effort to boost, encourage and educate the next set of financial advisers and it is rewarding to see that effort paying off.
“We know that now more than ever, people need the value that financial advice has to offer. A combination of pension freedoms, volatile markets and the need for wealth to filter down the generations are just some of the reasons the UK public are having sleepless nights.
“To substantially reach more people is to increase the number of advisers,” he added.
Different models, different burdens
Thompson believes that the growing number of restricted advisers can be attributed to the lower risk associated with its model, and the greater regulatory impact independent firms and planners are experiencing.
“The increase of restricted to independent to some extent is not important. However, it is understandable that we might see more firms and advisers opt for restricted advisers as it is a lower risk model to offer advice at scale, while ensuring customers receive good outcomes and meeting the considerable regulatory burden.
“The weight of the regulatory burden on advice businesses have been steadily growing and shouldn’t be underestimated.
“The impact is likely to be more acute for independent models as analysing and monitoring the huge variety and range of products, funds, wrappers and platforms is a time-consuming and costly process.
“Restricted advisers can benefit from experts who research and vet products so they can focus on financial planning areas, which add significant value to their clients and serve a wider clientele,” Thompson said.