Tough regulation and rising costs are driving thousands of UK small financial advisers out of an industry which will end up dominated by a handful of players, like banking and food retailing, investment manager Hargreaves Lansdown said.
Reforms introduced this year on retail financial product sales have coincided with an overhaul of the entire regulatory infrastructure, with asset managers now answering to a newly-created watchdog, the Financial Conduct Authority.
But complying with the changes is proving expensive and higher running costs have already driven out of business many of small financial advisers that were once central to investment selling in the UK.
“Because those costs are constantly rising... more and more you have to be a big player in order to be successful,” said Ian Gorham, chief executive of FTSE 100-listed Hargreaves Lansdown, founded in 1981 in the bedroom of a house in Bristol by Peter Hargreaves and Stephen Lansdown.
“I don’t think Peter and Steve could set up the business from a back room today,” said Mr Gorham, whose firm has three Yorkshire advisers. The Retail Distribution Review came into force at the start of 2013, replacing commissions-based sales to consumers.