The short answer is probably not although the FCA’s warning should be taken seriously.
There’s no doubt that while Financial Planning has done remarkably well since lockdown that’s not a universal experience and many financial services firms are suffering to varying degrees.
Many regulated firms have been hit. Indeed few of the companies we cover have reported anything but a bumpy ride over the past nine months. Where I disagree with the FCA is the suggestion that thousands of firms could fail this year because they probably won’t.
According to the FCA’s Coronavirus Financial Resilience Surveys published this week 59% of regulated firms have seen their income hit during the pandemic with some of these seeing income drop by a quarter.
The FCA’s survey suggested that 4,000 firms with '"low financial resilience" are at risk of failure although the FCA admits many will recover, depending on the recovery in the economy.
The ‘4,000’ figure has attracted the headlines and implies thousands of firms are about to go bust. They aren’t. Have they been hit? Yes. Are try doing their very best to continue in business? Most certainly are and adapting too; evolving and learning new tricks as they do, as all good businesses should.
Will some firms go to the wall? Well that’s likely, as many financial firms go bust each year but that’s been happening for years and is not just due to the pandemic. For example, the FSCS has just declared today 13 failed firms in default but that’s not a particularly high number and many of those went bust years ago. There is little evidence of wholesale failure.
I foresee problems in some areas but many areas, such as Financial Planning and wealth management, will be relatively unscathed in comparison with, say hospitality and travel.
The FCA does not break down its retail investments sector to show advisers / planners but the figures in the report suggest that overall this sector is faring no worse than most.
At present we are in a national lockdown, Lockdown 3.0, as some have called it. That’s not conducive to Financial Planners doing new business but as our planner straw poll showed this week many planners are quite happy with working from home with some working from small offices, perhaps solo, when they need to. There’s no sign of panic. Some are even enjoying and learning from the experience and the remote working trend has been under way for many years, in any event.
I do not diminish for a second the suffering of many families and individuals hit by the virus - Coronavirus is a very serious threat - but nationally, with vaccines being rolled out the hope is for the death toll and number of cases to begin falling by the spring. If the strategy works, by summer things could look quite different. Let’s hope so.
• Whatever the challenges, a very Happy New Year from me to all our readers. I hope it’s a good one for you and that your business prospers this year, lockdown or not.
• Get 50% off a subscription to Financial Planning Today Magazine for a limited time by using code '50SAVER' and get a host of benefits. https://www.financialplanningtoday.co.uk/fp-today-magazine.
Kevin O’Donnell is editor of Financial Planning Today and a financial journalist with 30 years experience. This topical comment on the Financial Planning news appears most weeks. Follow @FPT_Kevin