Advisers are divided over the impact of regulation implemented a year ago to help uniform the industry. The Retail Distribution Review (RDR) came into force on December 31.
RDR banned advisers from taking commission for selling products and instead said that that all fees, paid only by clients, had to be agreed in advance. All financial advisers now have to carry at least a QCF Level 4 qualification in order to practise, and offer investors the full suite of assets and products in order to retain the "independent" tag.
Reception has been mixed among both advisers and investors for RDR. Schroders Adviser Survey revealed that advisers felt there had been some negative impacts of RD - including increased costs and increased administration and regulation.
Advisers also cited regret at the creation of an "advice gap" for low and middle net worth individuals. Six in 10 advisers said they had segmented their clients based on the size of their portfolio - with 14% admitting they had asked investors with less than £50,000 to leave.
"Regulation has made financial advisers more efficient," said Schroders head of UK intermediary Robin Stoakley. "The advice gap is an unintended consequence but does exist."
According to a new study by Investec Wealth & Investment 43% of advisers admitted RDR had improved the quality of advice they provided. Six in 10 advisers also said that the regulation had improved their knowledge about the investment sector.
But advisers also said RDR has proved a challenge, citing the costs they have incurred and revealling that maintaining levels of profitability was difficult.
Mark Stevens, head of intermediary services at Investec said one year on, the overriding challenge posed by RDR had been the financial costs involved with transforming advisers' business models and the impact this had had on their profitability.
"This has translated into consolidating and in some cases reducing client bases in favour of driving profitability," he said. "We expect that over 2014 the focus will shift back to growing their businesses."