Advice firms look after more clients and more assets than ever before. Contrary to popular belief, adviser numbers have risen since 2016, although much too slowly to keep pace with demand. Despite economic and regulatory challenges, advice business has proved to be extraordinarily resilient.
This resilience is rooted in adaptability and the 2024 issue of UK Financial Advisers: Market Overview maps how the market has changed and the trends driving its evolution:
– Consolidation – half of advisers now work in firms with over 50 advisers. Outside investors have spotted the strong demand for advice, the high-quality earnings and scope for extra profits from scale. However, M&A activity has slowed with the cost of debt making buyers choosier and less prepared to pay top prices. Consumer Duty has also put a break on some of the more aggressive onboarding of client assets into centralised propositions.
– Dynamic smaller firms of breakaway advisers have set up on their own with a clean sheet and a nimble approach to providing value to their clients and building profits for themselves. Larger businesses should pay attention – these are the nurseries of innovation and good practice.
– Productivity is now a critical focus for all advice firms. Consolidators need growth to drive valuations. Smaller firms need it to counter the impact of inflation on business costs and build value into their businesses. The limited supply of advisers is a growth restrictor for all firms but targeting ever wealthier clients can’t be the only response.
Overall, we see better technology unlocking efficiency gains to boost profits or at least protect existing margins. For now, advice businesses are thriving and evolving rapidly. Asset managers, platforms, wealth managers, tech suppliers and indeed anyone who depends on this market need to keep evolving their own viewpoints and strategies – otherwise, they’ll risk losing out to the new players.
We cover all of this and more in our recently published UK Financial Advisers: Market Overview report. For more information, please get in touch.