Press release
Seven out of ten IFAs do not want to lose independence
19 September 2007AEGON’s fourth IFA Insights Survey highlights IFAs views on FSA’s Retail Distribution Review discussion paper
- 80 per cent of IFAs will join a flight to quality and seek to become professional financial planners in the new regime
- 69 per cent say losing independent label would matter to clients
- Most IFAs (85 per cent) believe that what consumers perceive and value most about ‘independent advice’ is selecting products from the whole of the market
- 76 per cent believe many consumers cannot afford full advice or find an adviser willing to advise them
- 62 per cent believe that if they move to professional financial planner status they might not be able to service existing clients
The results of the latest AEGON IFA Insights Survey,* show evidence of a flight to quality among IFAs with eight out of ten IFAs saying they intend to seek professional financial planner status in the new advice regime. AEGON suggests this could be driven by the desire to maintain the independent label which nearly seven out of ten IFAs (69 per cent) say is important to their clients. AEGON warns the FSA to take great care when defining independence as it is likely to be a major driver of IFA behaviour.
According to 85 per cent of IFAs, by far the most important element of independent financial advice for consumers is its whole of market offering. This is perceived as a much more important factor of independence than how advisers are paid, with only half of IFAs (49 per cent) choosing “offering to pay a fee” as an important feature. Despite the FSA’s proposals to link independence with high levels of professional qualifications, less than two out of ten advisers (19 per cent) thought consumers or their clients perceived this as a necessary factor of the ‘independent’ label.
Worryingly, 62 per cent of IFAs believe they might not be able to service all of their existing clients if they move to professional financial planner status. This, combined with the fact that over three quarters (76 per
cent) agree with the FSA’s view that many consumers cannot afford full advice or find an adviser willing to advise them, indicates how important it is to develop new solutions for moderate and lower earners. One solution might be for IFAs to offer more than one form of advice to clients and 51 per cent of IFAs said that, ignoring any costs involved, this would be an attractive proposition.
AEGON asked 100 IFAs:
Looking at the key decisions you or your firm may have to take in light of the retail distribution review proposals do you strongly agree, agree, disagree or strongly disagree with the following:
| ‘agree’* | ‘disagree’** | |
|---|---|---|
| I already have the appropriate level of qualifications or intend to obtain further qualifications to move to professional financial planner status | 80% | 19% |
| If I move to professional financial planner status I might not be able to serve all my existing clients | 62% | 37% |
| Losing the ‘independent’ label would not matter to my clients | 30% | 69% |
| Ignoring any costs involved, it would be attractive to be able to offer more than one form of advice to my clients | 51% | 38% |
*Those saying 'Strongly agree' or 'Agree'.
**Those saying 'Strongly disagree' or 'Disagree'.
Steven Cameron, head of business regulation, comments:
“The research was carried out a few weeks after the discussion paper was published so it’s not surprising to find a degree of concern among IFAs about some of the FSA’s proposals. However the majority agree with three out of the five market problems identified by the FSA, so there is clear acceptance of the need to act. In particular IFAs agree that lack of consumer access to full advice is a significant problem for the industry. Our research indicates it’s likely full advice will be available to fewer people in the new regime as IFAs move to the top of the advice spectrum and are able to serve fewer clients.
“This means it’s imperative the debate moves on to focus on how best to serve the remainder to close the advice gap. IFAs broadly agree there are issues to resolve so, where they don’t agree with the FSA’s proposed solutions, we need to come up with better solutions. Now is the time to think creatively.”
* The research was conducted by Populus between 10 and 17 July 2007. 100 IFAs nationwide were interviewed by telephone.
Notes to Editors
- AEGON’s quarterly IFA Insights research initiative aims to gauge the opinion of IFAs on the emerging issues affecting the industry. The first report, published in November 2006, canvassed opinion of issues such as financial capability, recruitment and the future of the IFA sector. The second investigated the issues around the FSA Review of Retail Distribution assessing awareness of the review and seeking opinion of some of the potential outcomes. The third looked at the changing nature of retirement planning and saving for the future. More information on the IFA Insights initiative and copies of previous reports can be found at www.aegon.co.uk/media.
- AEGON is one of the world’s largest insurers with assets under management of £245 billion. AEGON UK has assets under administration of £49.8 billion. In the UK we offer pensions, life insurance, asset management and advice businesses
Steven Cameron
Margaret Robertson