Advisers fear Covid-19 exodus despite growing demand from clients
Advisers are braced for firms to shut or be sold and more advisers to retire in the wake of the Covid-19 pandemic, new research from independent analysts AKG, for its independent paper Future of Advice – Beneath and Beyond, shows.
They are predicting a shake-up of the advice industry even though they expect a rise in demand for financial advice with the impact of Covid-19 a major driver for clients to seek support, the research conducted during the crisis shows.
More than half (53 per cent) of advisers believe firms will shut as a result of the pandemic while 45 per cent expect more advisers to retire and a third (34 per cent) forecast a rise in the sale of businesses, research for the paper, sponsored by Canada Life, Charles Stanley, Fidelity FundsNetwork and Intelliflo, found.
But at the same time advisers predict demand for their services is growing with 52 per cent saying they will attract more business from existing clients, while 48 per cent expect more work from new clients.
Research among consumers provides further optimism with nearly one in five adults (17 per cent) – around nine million people - saying they specifically need advice to address financial issues caused by Covid-19. More than two out of five (44 per cent) are concerned about the financial risks from major shocks such as pandemics.
AKG believes the pandemic is accelerating changes that were already underway as demonstrated by the rise in M&A activity across the sector and the age profile of advisers and calls on the industry to develop a longer-term strategy for increasing the numbers of advisers and clients.
Its paper Future of Advice – Beneath and Beyond outlines the impact on new business from Covid-19 with firms struggling to attract new clients beyond personal referrals while grappling with changes to their service models.
Customers questioned for the study are more than twice as likely to prefer face to face advice – 55 per cent preferred seeing a person to 22 per cent who would prefer to rely on technology. However, advisers are very much embracing technology and see it is a “crucial facilitator” in the long-term future of the market.
AKG’s study found the biggest barrier to consulting an adviser is that many consumers think they don’t need them – 43 per cent of those who haven’t seen an adviser in the past five years believe they have enough knowledge to decide for themselves. Just 27 per cent do not want to pay.
Matt Ward, Communications Director at AKG, says: “It is difficult for advice firms to think beyond the immediate day-to-day pressures of responding to the massive impact that Covid-19 has had and is having.
“But they need to look to the longer-term and particularly when so many firms are expected to leave the industry at a time when advice is needed so much, and demand is growing.
“Intermediary distribution is the lifeblood of the financial services companies assessed by AKG and so a key part of our work in assessing the operational strength and sustainability of these companies involves close monitoring of the likely future shape of the advice market.
“Through this fresh research and its findings, we wanted to provide a platform for ongoing industry discussion and debate.”
Advisers questioned for the paper stress that they are facing other major issues – their biggest concern is the rising cost of Professional Indemnity Insurance cited by 71 per cent while the other major worries are risk and compliance (51 per cent) and MiFID II/PROD (45 per cent).
The paper is sponsored by Canada Life, Charles Stanley, Fidelity FundsNetwork and Intelliflo. AKG would like to extend its thanks to the sponsors for enabling the facilitation of this research project and the publication of the resulting paper.