I have some bad news for the Chancellor. The financial services sector, one of the great hopes of the government in terms of jobs and economic revival, is shrinking.

At least in terms of the number of FCA-regulated firms.

Indeeds thousands of regulated firms have been deauthorised in the past year.

This may come as a surprise to a lot of people, particularly the government, but it isn’t necessarily bad news.

The Financial Planning sector itself is continuing to show strong growth in many areas and the sector may be pausing for breath rather than shrinking permanently.

The big picture among regulated firms, however, is one of decline with the number of firms down by 7% over the past year to 75,213, according to data provider Autus.

Some 6,684 firms became de-authorised over the last six months and 14,715 individuals left the register.

Consolidation, including M&A activity, has played a big part here, particularly in the adviser sector where barely a day goes past without another takeover or merger being announced. We may also be seeing the fallout from Covid, Brexit, the challenging economic times and a tectonic shift in the financial services sector towards bigger but fewer digital players.

Without asking each firm that put away its calculators what their reasons were it’s impossible to know for sure. All we can say with certainty is that there are many fewer firms than this time last year.

One factor may be the FCA itself and what might be called ‘tidying up.’ One of the FCA’s remits is now to encourage growth in the sector but it’s logical for the regulator to want those firms that are authorised to be robust and financially sound. Getting rid of the firms that cannot be bothered to pay their fees may be one factor behind the shrinkage. Other smaller firms may have been encouraged to call it a day. Over 400 small friendly societies, for example, have been deauthorised in the past year.

Despite the decline in company numbers it is far from doom and gloom.

The number of individuals authorised to provide investment or mortgage advice fell only slightly from 66,607 to 66,316 over the past six months and there are still 280,000 individuals on the FCA register. There are believed to be well over 1m people working in financial services although recent redundancies will have chipped away at that.

Looking more closely at the Financial Planning and Wealth Management sectors there are also signs of continuing growth.

Wealth manager St James’s Place broke through the 5,000 adviser mark for the first time in the second half of 2023, according to the figures, adding 77 advisers in the six months to reach a total of 5,051. 2Plan increased regulated individuals by 146 to 593, True Potential was up 37 to 1,162, Fairstone up 62 to 396 and Best Practice was up 48 to 362. It was not all plain sailing though with Openwork cutting numbers by 94 to 2,932 and Tenet down 76 to 261.

My reading of all this is that the sector is still dynamic but undergoing sustained consolidation and major change. Regulated firm numbers could well continue to fall further but the number of advisers and regulated individuals could grow as people shift to bigger, better resourced firms. There are clear signs of an emerging group of larger Financial Planning or Financial Planning-focused wealth management groups growing rapidly, helped by private equity funding.

The path to growth, however, will not always a clear or stable one. Some firms will fail and others will fall by the way side. The shift to digital services and AI will also play a significant part in any change.

The figures are a reminder, however, that growth in financial services is far from guaranteed.

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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and mainstream news. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days.  Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Follow @FPT_Kevin