Losing up to 20% of IFAs is an acceptable cost in order to deliver the specific improvements brought in by the retail distribution review (RDR), according to the FSA.
Giving evidence to the Treasury select committee this morning, Hector Sants, chief executive of the FSA, said if the reduction in advisers was not acceptable the reforms would not be going ahead.
He said: “We have some suggestion that 10 to 20% reduction in capacity could flow from the RDR measures; we have obviously deemed that to be acceptable or we wouldn’t be going ahead.”
He was responding to a question from Mark Garnier, committee member and Conservative MP, who said that while the RDR is not wholly problematic, a significant proportion of IFAs are thinking of leaving the industry.
He said: “There is a significant proportion of IFAs, up to 30%, who are now thinking of coming out of the industry altogether.” (article continues below)
Sants said: “In my experience in the lobbying process you tend to get these extreme statements made which do not necessarily come about in practice.”
Lord Turner, FSA chairman, said the reduction could be good news for consumers who may see a reduction in administrative costs.
He said: “Some exit of capacity from the industry, which is therefore an exit of administrative cost, may be in the interest of consumers, it a cost which is being absorbed.”