8,000 investment advice jobs to go when RDR comes in
The retail distribution review (RDR) is about to change the landscape of the financial sector beyond recognition as a large number of financial firms and advisers face killing off.
Top of the list of businesses under threat are life insurance companies, claims Malcolm Kerr, financial services director at Ernest & Young.
RDR is turning life insurers into ‘admin machines’ and they are ‘running out of proposition’, explained Kerr.
“A number of top life companies won’t be around, or open to new business because they are running out of proposition,” he said.
“Some insurance companies are beginning to have discussions with some of the platforms to provide them with their underwriting, and the platforms will borrow an insurance company’s balance sheet to create their own white label protection ranges, leaving little margin for life companies.
“Relying on IFAs to sell their products is not a reliable strategy, because their products are of no interest to them.”
Kerr also warned that poor performing networks, fund managers and platforms risk consolidation, but he predicts firms offering independent financial advice will grow stronger.
“IFAs are starting to develop their own tax wrappers and administration through platforms, as well as DFMs and DIFs. The only thing they don’t do today is risk management,” he said.
Research by E&Y forecasts the number of investment advisers will fall from 28,000 to under 20,000 by the end of 2013, mostly as a result of banks reducing or closing their operations.
“When the banks looked at their advice model, you’d be astonished to hear that the cost of advice in a bank is very, very high,” he said.
HSBC, Barclays and Lloyds TSB were estimated to have lost up to £200,000 per adviser once overheads were taken into account, commented Kerr.
His review of RDR at the PIMS conference on board the cruise ship Aurora concluded with the observation that it was “extraordinary” that no one had created a national retirement specialist, a market estimated to be worth up to £750 billion.