KPMG raises concerns over "play it safe" advisers

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Financial services consultancy KPMG has voiced concerns over the impact of regulation on advice for long-term savers, in its latest report on UK wealth management.

According to KPMG, regulatory changes could lead to some advisers “shying away” from providing advice, offering instead lower risk products.

Tom Brown, European head of investment management at KPMG, says: “Whilst lower risk strategies will be appropriate for many clients, particularly those at, or near retirement, there will be clients who are at a stage of life when they could be taking more risk with some of their investments, to improve longer term rewards and meet their retirement aspirations.

“The long term policy impact on 2030 retirees, who are now in their 40s and should be building their long-term savings, could be significant.”

Brown says many advisers fear punishment by the Financial Services Authority for mis-selling riskier products.

He warns: “If regulation steers financial advisers to offer lower risk products across the board, we may end up with a situation where investors must either save more or accept that they will be disappointed with their long-term returns.”

The report also highlighted the impact of increasing advice costs under the new regulatory regime, which could encourage younder investors “to shun professional advice” and manage their own portfolios.

Brown says: “It is concerning that many everyday investors don’t use or see the value of financial advice, and on the whole are unwilling to pay for it.

“As the onus is increasingly left to the individual to make provisions for their long-term savings, it is alarming that people are likely to spend more on a plumber than on financial advice, which could set them up for retirement.”

He adds: “Since 2008 - for the first time in 20 years - costs are rising faster than revenues and we predict that if revenues fall by another 15%, close to one third of wealth managers will be making a loss.

“As profitability is challenged, it is inevitable that businesses will be passing on the some additional costs to clients, which will unfortunately further discourage investors from getting financial advice.”

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Readers' comments (3)

  • If only the FSA would listen to the prfessionals in our business they may just realise what a mess they are making with RDR

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  • Hardly a surprise. Who wants to set themselves up as a target for the FSA or litigious clients and 'claims management' companies?

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  • The FSA have made RISK into a four letter word. Something to be avoided or certainly minimized.

    A risk free investment is one where the risk is not apparent. Even the FSA must see this eventually . There is no such thing as a free lunch. The only choice we have is which risk to take - not whether to take any risk at all.

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