St. James’s Says Clients Are in ‘Nightmare’ of RegulationGiles Broom
New regulations, including the U.K.’s Retail Distribution Review, make finding financial advice more complicated for wealth-management clients, according to St. James’s Place Plc’s David Bellamy.
“It’s just become more burdensome for people,” Bellamy, who is chief executive officer of the London-based wealth manager, said in a panel discussion at a Marketforce conference in London today. “It frightens people away from the market.”
The Retail Distribution Review, or RDR, culminated in rules designed to reduce mis-selling and build consumer confidence after a number of scandals linked to improper sales of some products. The regulations, which took effect on Dec. 31, require U.K. financial advisers to charge customers up-front fees and ban them from taking commissions from product providers.
The market for financial advice has become “transparent, but not simple,” St. James’s Place said in an investor presentation last month. The firm provides advice to individuals, trustees and businesses and oversaw 41.8 billion pounds ($68 billion) for clients as of Sept. 30.
The number of U.K. financial advisers fell 20 percent to 20,453 last year, the firm said, citing figures compiled by the Financial Services Authority. Bank advisers slumped 44 percent, while wealth managers and stockbrokers declined 8 percent.
The drop in advisers worsened the choices for investors, Bellamy said today. Trying to pick an adviser is more complicated now and the new fee structures are a “nightmare for clients,” he said.
Financial companies, including Barclays Plc, HSBC Holdings Plc and AXA SA, have pulled back or stopped providing certain face-to-face advisory services to less wealthy clients, citing difficulties finding a viable commercial model.
The drop in financial advisers was an “unintended consequence” of U.K. regulators’ actions, according to Tracey Reddings, head of JPMorgan Chase & Co.’s U.K. private bank.
“The intention of the regulation was to create a stronger environment for better advice for clients,” Reddings said at the conference. Regulation has “become more complicated; it’s become more costly,” she said.
The Financial Conduct Authority, which succeeded the FSA as the U.K.’s industry regulator, said some advisers re-entered the market, boosting the number in line with expectations in the seven months through July, according to a statement on its website.