At the end of 2014 there were approximately 23,640 financial advisers working in financial adviser firms, down from about 27,000 in 2009, the Association of Professional Financial Advisers (APFA) said in its third annual “The Financial Adviser Market: In Numbers” report.
“Two years after the Retail Distribution Review (RDR) was implemented it seems the adviser market started to stabilise in 2014,” Chris Hannant, director general of the APFA said.
Despite a rise in the number of the mergers and acquisitions across the market, there was also a 6 percent rise in the number of advisory firms and these firms reported a 13% rise in turnover, but profit margins remain low at under 5 percent, the APFA survey found.
Advice costs rise
“Furthermore a study by Europe Economics on the post implementation review of RDR, commissioned by the FCA, indicated that the cost of advice had risen since the RDR was implemented, “APFA said in manifesto published along with its report.
Given the growing need for financial advice, particularly in the wake of the new pension freedoms introduced on 6 April, APFA said it was increasingly important that the government take action to reverse this trend.
Only around 20% of the UK population regularly uses a financial adviser, APFA said, but industry studies had shown that those that did take advice achieved on average £3,654 a year more in retirement income than those who did not get advice.
“Given the need for advice, we think it essential that action is taken to reverse the trend that has seen financial advice increasingly become the preserve of the wealthy,” the organisation that represents the financial adviser profession said.
APFA said its own surveys had revealed that many UK financial advisers had been turning away potential clients as the cost of providing the advice would not make it economic for the client.
“In the 12 months to January 2015, 60% of advisers turned away potential clients,” it said.
“The main reasons for this were the service offered to the client was uneconomical to the client based on their needs (42%), or it was unprofitable to the firm (29%). Finally 16% of these advisers turned away clients because they concluded that to meet the clients’ needs it was more appropriate to refer them elsewhere.”