These concerns are of serious importance both in the UK and elsewhere, in terms of the collective future strategy of the IFA profession, wherever it is based in the world, and the individual issues that impact on this strategy.
There are serious concerns in the UK that there has existed for some time a regulator that is not accountable to anyone – not even to Parliament – and so, ultimately, not to the populace. That is a frightening situation in a democracy. But if you believe that to be a UK-centric problem, think again, as Europe-wide regulator, the European Securities and Markets Authority (ESMA), has been recently accused of trying to extend the legislation that elected officials and the EU Parliament has agreed within MiFID II.
The UK advisory sector is still relatively large but faces serious challenges, some of which have been created by the latter stages of the Retail Distribution Review (RDR). Adviser numbers have already dropped by 12% since the RDR was introduced but there are fears that the loss of legacy trail commission, scheduled to occur in April 2016, could reduce adviser figures by a further 22%.
We hear much about the advice gap, meaning reduced adviser numbers are not in anyone’s interest, least of all consumers, and other regulators should strongly consider this when assessing the possible effects of a commission ban in their respective countries.
Regulatory costs have increased four-fold in the UK in recent times and, if adviser numbers continue to fall, these fixed costs of regulation will be shared among a decreasing number of advisers, leading to a spiral of decline.
Increased regulatory costs are heading the way of advisers in most other countries, and if adviser and intermediary numbers face a similar experience to the UK then those companies that welcome the changes may need to reconsider. The costs of doing business in the future may make it impossible for them to operate.
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Impartial advice should be available to the widest number of citizens possible, and it is in everyone’s best interests that the industry offers trusted solutions that create independence from state welfare for the populace.