- Advisers more concerned about the impact of the form-filling culture on their business than rising PI costs
- Reduced commissions and the impact of depolarisation of great concern
- Stock market, consumer confidence and housing outlook of little worry
The latest study by Sesame has found that advisers were more concerned about the impact that the onslaught of red tape would have on their business over the coming 12 months than they were about issues such as the availability and rising cost of PI, reduced commissions, the lack of recruitable talent within the sector and current stock market performance, many of which would not result in an immediate impact for advisers.
The findings form part of the Sesame IFA Barometer, an ongoing study of a representative sample of Sesame members, which examines the key issues facing advisers in the current climate.
Of those surveyed by Sesame, nearly two thirds (63%) of advisers said they were ‘very concerned’ about the impact that too much bureaucracy would have on their business in the coming 12 months. The results are in contrast to last year’s findings which listed the cost of PI cover at the top of the list of advisers’ key issues.
The report points to a far more relaxed attitude to PI cover. Sesame’s ability to negotiate a better PI deal for its members last year resulted in more than 90 per cent of premiums being cut by at least 20 per cent on a like-for-like basis, and has clearly contributed to PI being less of an issue in the latest IFA Barometer.
The survey found that for the first time, one in five members were indifferent to the effects that PI would have on their business in the coming 12 months. However it found that just over half of advisers (52%) were still ‘very concerned’ about the rising cost of PI cover, reflecting market uncertainty as to whether the trend in PI reductions will actually continue. The level of excess however remains a key concern.
Interestingly, the research found that factors out of advisers’ control such as falling consumer confidence, the performance of the stock market and housing markets were far less of a concern with only one in seven saying these issues were a serious worry.
Key findings
- Advisers in the north are more concerned about the rising cost of PI with 60% saying they are ‘very concerned’ compared to 49 per cent in the South.
- Older advisers still worry about the cost of PI with 61 per cent of those aged 50 and above being ‘very concerned’ compared to 45 per cent of those aged between 30 and 49.
- Nearly one in four (24%) of advisers surveyed are not at all concerned about the possible impact of poor consumer confidence on their business in the coming 12 months.
- Dwindling commission continues to be of concern for most advisers with 49 per cent saying they are ‘very concerned‘ by a cap on charges and the threat of reduced commissions. 38 per cent responded similarly in 2004.
- Stock market worries have increased with one in seven (15%) saying they are ‘very concerned’ about the impact the stock market is likely to have on business, up 5 per cent on last year.
- 39 per cent of advisers believe the market’s movements will have little or no impact on their business.
Charles Bryant, Sesame Commercial Director, said:
“The combination of depolarisation, increased regulation as well as heightened demand for IFAs to run a more robust and streamlined business has meant administrative tasks are taking up more time and effort than ever before.
“We recognise that the new regulatory requirements are aimed at increasing consumer confidence and protection – concepts that we fully support – but it is our role to ensure that we provide advisers with the tools to allow them to make these changes with minimum disruption to their business. From a member perspective, they need to easily address this new regime because if it stops them advising their clients then any changes are potentially counter-productive.
“Combating soaring PI premiums was a key priority for Sesame last year primarily because we see good value, quality PI cover as setting us apart from other networks. The deals we managed to negotiate for members and the subsequent reduction in the cost of PI cover have relieved some previous worries. By providing such support, our member firms have been able to get on with running their business profitably, safe in the knowledge that they are supported by a high quality PI policy.
“While there is no doubt there is increased bureaucracy emerging in the UK financial services arena, hopefully what will take shape in the long-term will be a more streamlined and accountable industry. In the meantime however, IFAs have a challenging year ahead and need all the support they can get.”
Concerned (2004) Indifferent
(2004) Of no concern
(2004)
Red tape 84% (59%) 9% (6%) 7% (1%)
Rising PI 78% (75%) 13% (4%) 7% (-)
Price caps 74% (38%) 17% (16%) 9% (2%)
Consumer confidence 44% (16%) 32% (29%) 23% (6%)
Depolarisation and introduction of menu charges 42% (14%) 29% (29%) 29% (11%)
Housing market 38% (not asked) 37% 25%
Stock market 39% (10%) 39% (38%) 22% (5%)
Employment pool 28% (11%) 34% (27%) 38% 23%)
