The Heath Report 3


The IFAA believes that its arguments should be based on facts. So, It publishes The Heath Report every other year.
Its purpose is to identify the availability of professional financial advice to the consumer as well as looking at the trends and financial viability of adviser practices.

These reports have been very well received by advisers, politicians and policy makers and have affected policy in a number of countries. The UN has The Heath Reports in its library.

The first 2 editions (THR1 & 2) concentrated on the ratio of consumers that each adviser was servicing after the introduction of the Retail Distribution Review. It then multiplied that by the number of full-time advisers registered with the regulator to define the Sector’s capacity

Historically, British advisers serviced 16m consumers from the 40m that were either working or retired. i.e. those potentially in the market for advice. That represented 40% of the possible market and 75% who sought advice.

RDR created a double whammy. The number of advisers dropped 5,000 between the time RDR was announced and its implementation. More importantly, as a result of RDR, firms decided that a fee- only environment would require them to cull the number of consumers each adviser was servicing.

The pre-RDR ratio of 401 consumers per adviser had dropped to 231 in THR1 and 194 by THR2. This dropped the sector capacity from 16m to 6.2m.

The Heath Report 3 (THR3) was published in 2019. It also looked at the retirement plans of advisers. This showed a drop of 1,650 advisers every year due to retirement – 3 times the previous rate. It also demonstrated a further drop in the ratio to 160 resulting in a drop in the capacity to 5.3m.

For adviser firms, these numbers are not just of academic interest. The cost of regulation is unlikely to fall in line with the adviser numbers and all these costs are paid by a firm’s clients via their fees. THR3 identified that each client would pay £72 pa for the direct cost of regulation in 2018. This was projected to double in 5 years.

During 2019, IFAA has been monitoring its predictions and has discovered that the projected retirements have accelerated significantly. As a result of this, the cost per client will become a major issue.

IFAA has been asked to speak at the G77 conference in the UN Building in New York. This gives us the opportunity to publish a sequel The Heath Report 3.1 with the latest data. THR4 will be published in 2021.

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