From what? The number of RFAs is genuinely hard to work out. The register is a mess 17,000 plus entries and rising. Because it is so simple (and relatively inexpensive) to register, lots of people do it. Most of these entries do not represent a person that gives advice. As quotemonster provides a useful free service to most RFAs that sell insurance we have a lot registered, but we have spent a lot of time weeding out 'dead' accounts, and we continue to see plenty of new registrations. Few will become successful advisers.
Do they all give advice? A significant number of people register as advisers and yet do not give advice. If you run a business which is, in fact, sales-only, there was still an advantage to register, as it reduced the risk and consequences should the person accidentally give advice. If RFA numbers fall that does not immediately mean that the number of advisers - meaning people actually giving advice - will fall.
How productive are they? It seems clear to us that most life insurance business is handled by the top 2,000 advisers, of which some 200 or so are AFAs. I expect the pattern to be little different for general insurance and home loans. A fall in the number of advisers does not equate to a fall in advice being given.
To what? Although the category 'RFA' will disappear, the people no longer in that category may appear in others. They may become FAs, or FARs, or they may sell but not give advice, as well as leaving the industry.
Of course, I am concerned that the new regime will result in a reduction in the number of advisers, and share that with Michael Dowling. The interesting thing about the likely reduction in RFAs participating will be the answers to the questions above. But the presence of the questions also tells us something about the current regime.
Inter-organisational co-operation is at an all-time high. The IFA has published detailed guidelines for navigating the changes in the AFA Code and educational and competency requirements in co-operation with Professional IQ and the PAA.
Thanks to the speakers at the breakfast session this morning on robo-advice. Paul Baldwin, Derek Grantham, Royden Shotter, Barry Read, Binu Paul, and Stuart Auld, and moderator Peter Lee.
Barry Read's and Binu Paul's comments about the actual use of robo-advice systems by customers were in sharp contrast to the expectations of use by some of the other speakers.
There was some confusion in definition. Some people plainly meant different things when they talked about 'advice' and more clarity came when someone - probably Barry - talked about the difference between full financial plans (rare, later candidates for robo) and the definition of financial advice in the FAA today.
Lots of talk about the appeal of robos being cost-based which was thoughtfully disrupted by Derek Grantham quoting from some research (qualitative, from a focus group) about Millennials talking about making fund selection decisions.
Royden Shotter commented that although there is a lot of variation in individuals and circumstances it is worth remembering that there isn't a lot of variation in strategies. Likewise good to note Binu Paul quoting Bill Gates comment that we tend to overestimate change in the three-year timeframe and underestimate it in the ten year timeframe.
Karen Schaeffer's address at the financial adviser conference boosted the cause of practical financial advice. This is the answer to the question 'what do I do?' not 'which fund should I invest in?' or 'which insurance product should I buy?' That focus dovetailed nicely with the joint IFA and PAA focus on advice, rather than product. It reflected well on the stated intention of the judges for recognition awards. In discussing the talk afterwards with other delegates I was struck by several things.
The first was that Schaeffer's business was considered highly niche. In one sense it was, being focused on government employees, many of whom are actually either from overseas, or US citizens destined to work overseas. But in another sense it wasn't: she gave pragmatic, common sense advice, to resolve financial choices that many people face. Her work was focused on those choices, not on product or fund selection. This is the type of financial advice we need more of, according to the kind of work done by, for example, the Commission for Financial Capability.
The second was that some members, typically investment planners, tended to comment on the fee-only nature of her business. Noting that it could only occur because the niche in which Schaeffer operates delivers people to her on a regular basis. Another way to look at that is as an admission of failure. If you are passionate about financial advice you will have to get good at selling the concept of financial advice. I make no apology for including the word 'selling'. My personal definition of good sales is 'helping someone make a choice beneficial to them'.
The third was that some members, typically my insurance adviser friends, tended to comment admiringly on both the choice to deliver high-level advice fearlessly and without putting it in writing. This must be placed in context - for product selection or fund selection clients I believe clients were referred to others. Those probably document all that. For delegates that liked this approach I think they were thinking along these lines: saying to a client 'you really need to save more' or 'you must pay down more debt' are such good general encouragements that they do not need to document them all.
The address was well delivered, worthwhile, and clearly stimulated a lot of discussion.
Congratulations to the IFA and PAA on the recent Adviser Conference. I enjoyed the conference sessions that I attended (and will blog separately on the presentation by Karen Schaeffer, a financial adviser from Washington, DC) and found the conference as a whole to be well-run and widely liked by the attendees I spoke to. The venue was excellent as well.