Riding a wave of opportunity


For adviser use only


It’s become a received wisdom in some quarters that less people are willing or able to pay for financial advice than in the past. The FCA’s Financial Advice Market Review was borne out of a need to address the perceived advice gap that has arisen since the Retail Distribution Review abolished commission and the Pension Wise service was set up in recognition that many people could need guidance and help around the new pension freedoms. A casual observer might conclude from all of this that the UK advice sector must be in decline. But talk to advisory firms themselves and it’s apparent that assumption couldn’t be further from the truth.

Profitability on the up

As part of our inaugural Adviser Attitudes Report, we asked 250 adviser firms around the UK about the health of their businesses. Four out of five firms have seen turnover grow over the past 12 months and the same proportion expect this to continue over the next year. At the same time, three-quarters (76%) said they expect the number of clients they service to increase over the next year, while just 5% expect client numbers to fall.

But perhaps most crucially – and despite widespread talk of squeezed balance sheets and increased regulatory cost burdens – three-quarters of firms say profits have increased in the past year and are likely to grow again over the next 12 months.

A lot of this business buoyancy can undoubtedly be attributed to the introduction of pension freedoms. Half of advice firms (53%) see defined benefit (DB) transfers as a key growth opportunity, and the fact that anyone seeking to transfer a DB pension pot of more than £30,000 can only do so with regulated advice is certainly keeping advisers busy.

But I think it’s also a great testament to how advisers are managing their businesses. Increased client numbers and turnover are not necessarily that hard to achieve. But it takes real business acumen and control to keep growing profitability – certainly in this sector where the cost challenges of implementing new regulatory requirements and assuring ongoing compliance are intense.

Smart technology

A lot of this is down to firms understanding the value of what they do and pitching the cost of this correctly. But it is also, I would suggest, down to smart use of technology. When I visit advisory firms I’m frequently impressed by how much more connected processes are becoming. It’s exciting for us – for example – to see how enthusiastic firms are to grab the possibilities of technology to make the process of engaging a prospect to delivering recommendations to onboarding them as efficient as possible. Or using technology to service existing clients in a highly professional way without the high cost of face-to-face engagement.

Creating a growth sector

And that’s really what gets us up in the morning. As Aegon and Cofunds come together and get ready to launch an enhanced platform service, we’re excited by the potential we can offer not just to help firms run their businesses better day-to-day but to be ambitious about their future growth.

Because what’s perhaps most heartening from our Adviser Attitudes research is that increased profitability and use of technology isn’t necessarily happening at the cost of human capital. More than a quarter of advisory firms (28%) say they need to hire more staff to meet increased demand – and that hiring is likely to be happening in those more value-added areas such as client servicing.

Despite the various headwinds it faces, the financial advice industry sector has the potential to be a growth sector that employs more people and becomes a real force in the UK economy. Our future Adviser Attitudes Reports will continue to plot this journey at the grassroots among advisers themselves. Because what’s clear from our first report is that reality in our industry can be very different from perception.