7th December 2015
The majority of independent financial advisers believe the scrapping of commission payments has had a positive impact on the overall quality of advice.
New research from fund management group Schroders shows that almost 60% of advisers feel the Financial Conduct Authority’s (FCA) so-called Retail Distribution Review (RDR), which came into force on New Year’s Eve 2012 has been a force for good.
The legislation had the aim of making the cost of investing via a financial adviser more transparent, as it got rid of the practice of product providers paying advisers commission for recommending their products.
As a result of the RDR investors now have to pay upfront for advice, either via a percentage fee or an hourly rate,
The annual ‘Schroders Adviser Survey’, found that intermediaries feel that the new backdrop has resulted in far better clarity in terms of fees as well as more professionalism and awareness of adviser value.
The analysis showed that just 18% of advisers felt the RDR has not had a positive impact on the overall quality of financial advice.
Advisers identified increased administration and regulation, increased costs and the growing ‘advice gap’ for low/middle net worth individuals as some of the least positive impacts of RDR.
In addition the survey showed that outsourcing of portfolio management is continuing to grow as more advisers concentrate on providing holistic financial advisory services to clients.
Some 55% who already outsource, are increasing the proportion they are farming out, with 88% stating that they will continue to outsource portfolio management next year.
The study also highlighted that passive fund usage is starting to stabilise with 66% of advisers using passives for client portfolios and only 19% planning to increase their use of passives in the next year.
In terms of asset allocation choices for 2016, developed market equities are still seen as the favoured asset class amongst advisers with 9% of advisers saying they would expect to recommend UK Equity Income funds to clients in 2016 and a further 9% saying they would recommend UK All Companies portfolios.
Commenting on the results Robin Stoakley, managing director, UK intermediary at Schroders said: “It is encouraging that advisers believe RDR has had a positive impact on the overall quality of advice, this is the highest approval rating advisers have given the RDR in the history of our survey.
“I am also pleased to see that the growth in passive usage is slowing as advisers recognise that active funds are a vital part of the investment mix to deliver on customer aspirations.
“Finally, it’s good to see the continued trend for advisers passing client assets to professional managers such as wealth management firms. In these uncertain times for markets, client portfolios need all the help they can get.”