The Retail Distribution Review has virtually killed off bancassurance and caused many older advisers to exit, leaving recruitment business to pick up the pieces – but it was worth it, says Rachael Fennessey.
The founder of adviser recruitment business Aspire Executive Search says 2012 was a time when businesses needed to embrace the changes and find their opportunity from it.
This included recruiters. As bancassurance advisers started to flood the market, recruiters had to refocus on supporting the independent marketplace and helping advisers transition the change in their own career paths.
Now, Fennessey tells FTAdviser In Focus, there is a "distinct talent shortage", which is driving up the salaries of experienced, competent and well-qualified advisers.
This, in turn, is making it difficult for smaller businesses to continue to compete, she says, as she explains the challenges recruiters have been facing in the first 10 years of the RDR.
FTA: What was the immediate impact of the RDR on recruitment in 2013?
RF: It forced many advisers into early retirement and the transition of regulated advisers into the protection, mortgage and equity release markets.
The industry lost a lot of 'qualified' financial advisers and there was a massive talent drain as a number of advisers that had never done the Advanced Financial Planning Certificate felt that the step to Level 4 was too much for them in the later stages of their careers.
It was a shame for the older advisers as there was a talent pool there that could have been harnessed and utilised and instead it was lost.
FTA: How did recruiting advisers change in the early years of RDR?
RF: There was an initial lull, the industry lost a clear direction with businesses having to refocus their direction and recreate their advice model and navigate the accompanying costs.
There was a transition period where advisers who had only ever been employed had to rethink their strategy and consider going into the independent financial advice market and look at self-employed options, which did not feel comfortable to many.
Prior to RDR the advisory sector was transactional in the main and this meant that advisers would jump from job to job looking for new business opportunities as there was little or no on-going income.
This of course all changed. With RDR, the reduction in initial fees meant that advisers had to work harder to maintain their income and it favoured advisers who had already transitioned to a fee charging model.
The IFA businesses who had started to change their fee structure in the years preceding RDR were better placed to make the transition and continue to grow their business model, but many practices had not evolved to this model and so the transition was complex and costly, which inhibited their growth while they restructured their operations.
