One of the main talking points this week has been the FCA’s Adviser Survey which seems to point to both positive and negative factors, as far as the professional advice sector is concerned.
One of the key findings is how consolidation is reshaping the financial advice sector, with the number of regulated advice firms falling rapidly over the last five years.
The average number of advisers employed per firm has risen overall due to consolidation, perhaps no bad thing.
Large advice firms, those employing more than 50 advisers, now form just 1% of advice firms overall but provide advice on half of all client assets.
However, this does not mean smaller firms have no clout. Smaller firms with one to five advisers control 26% of client assets and form 87% of all firms. There is much activity in both the larger and smaller ends of the spectrum.
There are also positive aspects to recruitment, with the average age of advisers now in the 40s and some firms, such as Quilter, reporting that the majority of their new academy recruits are in their 30s. So it should be time to break out the bunting and celebrate but the survey doesn’t quite give carte blanche for a party.
So why not?
According to the survey, the number of adviser firms is set to fall by another 5% by 2028 with an expected 250 firms likely to merge, be acquired or close down. And, realistically, there are no real signs of a rise in adviser numbers on the horizon.
This is surprising in many way because one positive finding from the survey factor was that regulated financial advisers remain responsible for huge amounts of investments. In London alone the survey revealed that the average advice firm was responsible for £143.9m in assets. For financial providers reaching the Financial Planning / Financial Advice sector continues to make a lot of sense in distribution terms.
Targeted and Simplified Advice may change the equations somewhat over the next few years but there is no doubt financial advisers remain a key part of the wealth management sector and that’s not likely to change soon, if anything their influence may grow as wealth accumulates and client wealth grows.
The main challenge is the small size of the sector. While there are about 31,000 advisers overall there are little more than 26,000 regulated financial advisers working in firms and that’s a small number compared to many other professions. For example, there are well over 200,000 solicitors in the UK and over 50,000 architects. Financial Planning has some catching up to do.
With its new growth agenda the FCA should look at how it can stimulate growth of successful financial advice firms. The regulatory sandboxes and other initiatives are welcome but too many adviser firms find themselves coming up agains the headwinds of excessive regulatory demands and that likely slows growth.
The FCA should look at how it can encourage well run, successful financial advice firms to grow quicker and expand their workforces to reach more consumers.
Too much of the last 20 years in the advice sector has been about consolidation and that needs to change to growth and expansion. Consolidation has done much to improve returns in the financial advice sector but it has done little to stimulate real growth and that needs to change.
The advice sector needs more growth momentum, not more mergers.
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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:
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