As we get closer to its introduction – the it-will-not-be-moved date of 1 January, 2013 – there are still more than a few things to be resolved before the final RDR rules and regulations are in play , but one issue that is looking clearer is the number of intermediaries leaving the industry is likely to be less than originally feared.
The original back-of-a-fag-packet estimates from some of the bigger fund houses were that the number of IFAs would shrink from a rough estimate of 30,000 by one-third or even a quarter with as many as 10,000 individuals leaving the industry.
- In February 2009, Ernst & Young suggested that the number of IFA firms would be reduced post-RDR by as much as 40%, from 16,000 to 10,000, by 2013;
- In the same year an IFA Census survey suggested 25% of advisers would leave the advice market (6% of which would go elsewhere within the industry);
- In the very early days, internal FSA research had already estimated the number of firms exiting at between 12% and 18%, with a maximum of 21% but it has since said this should now be ignored given the way RDR has progressed;
- In March 2010, Oxera carried out further research on behalf of the FSA that showed a 11% reduction in the number of advisers and a 9% reduction in adviser revenues.
Some bang up-to-date research from Aviva Investors suggests 89% of IFAs are expecting to be in business on 1 January, 2013, although 40% cite remaining profitable as being their greatest concern.
The upshot of all this cogitating and number crunching is a consensus that the intermediary market is likely to reduce by early double-digits rather than the huge swathes originally predicted, and this would lead me to conclude that they are buying into the whole concept, whether they admit it or not.
The problems could come as we progress through 2013 and beyond if their revenue streams from clients dry up as surely as those from the fund houses is going to.