The uncertainty surrounding Britain’s exit from the European Union has, unsurprisingly, been ranked as the biggest threat to the advice sector over the next two years.
A hundred UK advisers were asked by insurer and pensions provider Aegon what they see as the opportunities and threats to their sector over the next two years.
The results were not exactly shocking.
“It would take a brave person to attempt to predict with any certainty the macro economic or political implications of Brexit and how investment markets will perform as we seek a Brexit deal and then move through the process of leaving the EU,” said Steven Cameron, pensions director at Aegon.
“Advisers may fear that any damage to the UK’s economic performance may mean less new money for individuals and employers to invest. However, those with existing investments will need help to ride out short term uncertainty without damaging long term prospects, creating a major advice opportunity.
“In times of uncertainty, professional advice can add huge value.”
Different perspective
But, as they say, one person’s threat is another person’s opportunity.
While 51% of respondents flagged up Brexit as a concern, 27% had a very different opinion.
The UK’s exit from the, currently, 28-member bloc was the second biggest opportunity for advisers after defined benefit (DB) to defined contribution (DC) pension transfers, which held on to the top spot for the second consecutive year.
This comes despite some speculation that the transfer market may have peaked and as the FCA’s guidelines on transfer advice start to bed in.
Cameron added: “It is no surprise that DB to DC transfers continue to be viewed as the biggest opportunity for advice.
“Whilst transfers volumes may have declined from a peak at the beginning of 2018, demand for such advice continues to outstrip supply and as advisers gain confidence in the recent FCA guidance, which sets out its expectations of ‘what good looks like’, we expect to see numbers rise again.”
However, he flagged up the area of professional indemnity (PI) insurance and the need to resolve the difficulties firms are experiencing in trying to obtain it.
FAMR failing?
Aegon highlighted its disappointment that new models of advice or guidance from the Financial Advice Market Review (FAMR) were only seen as an opportunity by 10% of adviser.
The joint HM Treasury and FCA initiative generated 28 recommendations to help close the advice gap.
This lukewarm response suggests that FAMR has not yet delivered on its potential, which raises the stakes of the FCA’s promised 2019 review of FAMR and the retail distribution review (RDR).
Cameron described the advisers’ response as “the biggest disappointment, if not surprise”.
“While other Aegon research points to advisers continuing to support the principles, the unfortunate reality is nothing much has changed in practice. With the FCA promising a 2019 review of FAMR and the retail distribution review, the stakes are high to find ways of delivering on some of this potential.”
