One common theme in discussions about RDR is around the number of Advisers. Or Independent Advisers. Or Registered Individuals. But numbers. And the story goes something like:
“Back in 1988 there were 240 000 Advisers, now there are only 50 000 / 30 000 / 20 000 / only 4 of us left”
Now, I have no wish to be unsympathetic at all to those that decided that retirement or another career was more attractive than dealing with the latest bout of regulatory change, and I am very clear that along the way we have lost some individuals that we would have preferred to keep in the profession.
But I got to wondering about that number. And the assumption that the larger numbers of registered individuals of the past were ‘right’, and the smaller number today is ‘wrong’.
So I have a couple of observations.
Firstly, that 240 000 figure. At the time that meant that about 1 in 100 of the working population was registered to give advice. Which at the time pretty much meant ‘sell insurance’. Really? That sounds nuts to me. In reality, many firms registered everyone in the firm, from Receptionists to Actuaries. If you remember the part time culture of the time as well, then that 240 000 figure looks very wrong.
I also got to wondering how other industries had changed. A few minutes on Wikipedia generated the interesting fact that in 1911 the largest single source of employment was Domestic Servant, with about 1 in 22 (1 300 000) of the whole population being a servant. Add in a million coal miners, 1 200 000 agricultural labourers and 600 000 people making cotton clothes, and you can see how the world has changed.
I am also reminded that I was once told that without computers, 50% of the adult population would be needed by the Banking sector.
So what is the right number?
I don’t know. But in any free market, supply will be influenced by demand. And if demand is based on those who have sufficiently complex affairs that paying for advice makes sense, then starting with a universe of 5 000 000 higher rate taxpayers makes sense. And suddenly that looks like around 150 clients per Adviser. Which does not sound silly. And not all those taxpayers will need on-going Advice, which is what our model is based on.
Which brings us to the root question, I think. And that is ‘What are we for?’. Are we still what we have been, which is Distributors of products – Salesmen in old money? Or are we truly Advisers?
If we are still Distributors, then we are going the way of Horse whip makers, Farriers etc. Overtaken by technology. We will soon be competing with Tesco’s and Amazon, not each other and the Banks. Good luck with that. They can sell to people who know and trust them for a fraction of our cost. And that is about the destructive evolution and creation of markets.
If we have evolved, and are Advisers, then the world looks different. Perhaps we are more like Architects? In which case, the article here – http://www.justpractising.com/its-about-money-stupid/76-of-architects-practices-are-less-than-10-people/ – may be interesting and familiar?
Another point about the numbers game is it looks at the world through the prism of Registered Advisers only. That is not the world the client sees. They get Advice from our firm. There are 6 of us. 4 could be advisers, but only 1 actually gives advice in real life. The clients deal with all of us, especially the Paraplanners. We choose to have 3 registered advisers, but we could have 1. Or 4. Which is the right number?
My conclusion is that we do not yet have a feel for the ‘Right’ number, because we are not yet at a point where we can answer the question ‘The right number of what?’.
Once we are clear about what we are, what value we add, and what the business model is, and look at this from our clients point of view, not merely the FSA Register, then some light, rather than heat, can be shed on the debate.