New regulations, including the U.K.’s Retail Distribution Review, make finding financial advice more complicated for wealth-management clients, according to St. James’s Place Plc’s David Bellamy.
“It’s just become more burdensome for people,” Bellamy, who is chief executive officer of the London-based wealth manager, said in a panel discussion at a Marketforce conference in London today. “It frightens people away from the market.”
The Retail Distribution Review, or RDR, culminated in rules designed to reduce mis-selling and build consumer confidence after a number of scandals linked to improper sales of some products. The regulations, which took effect on Dec. 31, require U.K. financial advisors to charge customers up-front fees and ban them from taking commissions from product providers.
The market for financial advice has become “transparent, but not simple,” St. James’s Place said in an investor presentation last month. The firm provides advice to individuals, trustees and businesses and oversaw 41.8 billion pounds ($68 billion) for clients as of Sept. 30.
The number of U.K. financial advisers fell 20 percent to 20,453 last year, the firm said, citing figures compiled by the Financial Services Authority. Bank advisers slumped 44 percent, while wealth managers and stockbrokers declined 8 percent.
Client ‘Nightmare’
The drop in advisors worsened the choices for investors, Bellamy said today. Trying to pick an adviser is more complicated now and the new fee structures are a “nightmare for clients,” he said.
Financial companies, including Barclays Plc, HSBC Holdings Plc and AXA SA, have pulled back or stopped providing certain face-to-face advisory services to less wealthy clients, citing difficulties finding a viable commercial model.
The drop in financial advisors was an “unintended consequence” of U.K. regulators’ actions, according to Tracey Reddings, head of JPMorgan Chase & Co.’s U.K. private bank.
“The intention of the regulation was to create a stronger environment for better advice for clients,” Reddings said at the conference. Regulation has “become more complicated; it’s become more costly,” she said.
The Financial Conduct Authority, which succeeded the FSA as the U.K.’s industry regulator, said some advisors re-entered the market, boosting the number in line with expectations in the seven months through July, according to a statement on its website.
UK Wealth Manager Number Drops 20% After Regs On Fees, Commissions
November 26, 2013
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This is another epic example of how government interference destroys industry, harms the consumer, and increases costs on all fronts. In case anyone in government actually does possess the ability to absorb and process information, they need to be informed of one immutable, irrefutable fact: It is IMPOSSIBLE to pass laws that actually prevent anyone from being harmed in some way from someone else. Any attempt at doing so simply results in a lot of even more harmful, unintended consequences. A government should operate in such a manner as to improve the lives of the citizenry by defining contractual standards and codes of conduct; not dictating contractual terms and obligations. People should be free to enter into ANY business arrangement they choose; but the law should require clear and apparent disclosure, most specifically of any terms which could be deem unfavorable to the party that did not write the contract. Laws should be based upon and operate on 'principle' and not the 'relevance' of 'legal precedent'. Otherwise, we will suffocate under the onerous burden of a burgeoning plethora of laws which become increasingly contingent, ambiguous, and contradictious. Centuries ago, whoever it was that said... "Hang ALL the lawyers"... must have seen our future.