Is there still a market for financial advice?
Listening to the gripes and grumbles of many financial advisers you could be forgiven for believing our profession is dying. There are not enough wealthy clients out there to go around, and the less wealthy cannot afford to pay our fees. We might as well give up and go home.
Another complaint is RDR. This review has made things too difficult. It is the nail in the coffin of independent advice.
Is this really the case?
Let’s look at this a little closer.
Certainly it is the case that RDR has made it rather more difficult to become or remain a registered individual competent and regulated to give investment advice. This is not a bad thing. Ours is a skilled profession and it is only right we should demonstrate that with the right qualifications.
Since December 2013 there has been a noticeable decline in registered individuals, and particularly in those authorised to give investment advice. According to Matrix Solutions there were 103,358 individuals registered to give investment advice in December 2013, but by January 2015 this number had shrunk to 99,071. A decline of 4.15%. Noticeable, but hardly earth shattering. Our profession is still alive and kicking.
Another way to look at this, of course, is that those of us who have survived RDR now have a bigger potential share of the market. If there are fewer qualified investment advisers and there are still as many wealthy individuals who need advice, then by definition there should be more business out there for each of us.
Looking again at figures compiled by Matrix Solutions, in Greater London, as an example, there are 185 potential investors for every registered IFA. For this purpose Matrix defines anyone who has invested in the stock market as a potential investor. Granted, this will include some investors who only have a few shares and do not have any disposable assets to make further investments. But it will also include many high net worth individuals. Bear in mind, too, that this number excludes all wealthy individuals who have chosen not to invest directly in the stock market. That number of 185 investors per IFA is therefore extremely conservative. The reality is there are considerably more.
If you are looking after your clients properly and giving them regular reviews can you really afford to take on more than 185? I suspect not. So there is definitely a market in Greater London for a good IFA to prospect.
But what if you do not want to take on clients in London? Is there a big enough market elsewhere?
The Matrix figures certainly suggest this is the case. In Hampshire there are 180 potential investors per IFA, and in Surrey 166. Going further North there are 128 in West Yorkshire and 122 in the West Midlands.
The market is most certainly out there. Potential clients are still crying out for proper advice. Advice which, as a fully qualified financial adviser, you should be ready to provide.
Finding the right prospective clients is not always, I will concede, the easiest task. But those prospective clients really are out there if you will only put in the right effort and use the right resources to find them.
I am grateful to Matrix Solutions who provided all the data I have used in this article.