United Kingdom (UK) Financial Advisors 2020 – Trends, Concerns, and Opportunities

While the UK financial advisor market enjoyed strong growth from 2016 to 2018, it has encountered increasing headwinds since 2019. Besides the obvious issue of the COVID-19 pandemic, the industry is struggling with rising costs and slowing revenue growth. Consolidation continues apace across the industry, with the number of firms – particularly smaller outfits – starting to decline. There has been a shift to mid-sized and large firms, with the average number of advisors per firm creeping up. While COVID-19 has been the key challenge for the market, other notable threats include Brexit and driving growth in the midst of economic downturn.

This report is a comprehensive analysis of the UK financial advice market, with a focus on key issues affecting independent financial advisors (IFAs) and their businesses. It provides an overview of the UK IFA competitive landscape, analyzing advisor numbers, business models, and industry consolidation trends. It also examines the key demographics accessing financial advice and the factors driving usage; identifies threats and opportunities for IFAs trying to expand their business; analyzes the impact of Brexit and COVID-19 on the UK financial advice industry; and explores factors influencing IFAs’ choice between independent and restricted models. The report draws from our proprietary survey data.

Scope

– Growth in average financial advisor revenues slowed or declined in 2019 depending on the segment. The largest firms of 50+ advisors experienced the greatest declines, with average revenues down 4.7% on 2018.

– COVID-19 is considered a threat by 13.8% of financial advisors but an opportunity by 9%.

– 61.8% of financial advisors use investment platforms. Those at the largest firms are most likely to work with multiple providers, while smaller outfits tend to keep their platform selection contained.

Reasons to buy

– Understand which segments of the UK investment market offer the highest growth potential.

– Identify the main pain points of IFAs to engage with them effectively.

– Analyze consolidation in the UK IFA market to understand how you can benefit from current trends.

– Learn how IFAs choose their partners and product providers to increase your penetration of the market.

– Understand the impact of Brexit on the financial advice industry along with the ongoing disruption of the COVID-19 pandemic.

Companies mentioned

FCA

Cofunds

Aegon

Blevins Franks

Asia International

Blacktower Financial

St. James’s Place

Openwork

threesixty

Bankhall

and SimplyBiz

Sanlam

Tenetselect

Stirling House

AFH

AE Financial Services

Ascot Lloyd

Ashton House

Aylwin

Belasis

Brewin Dolphin

Core Financial Services

CTL Three

CWP Financial Services

Debbie and Nick Burchall

DG Pryde

Emery Little Financial Services

Fairstone

Generic Financial Management

Grennan Advisers

Harvey Curtis

Harwood Wealth Management

HMFC Wealth Management

Index Wealth Management

Lifetime Investment & Seminar Services

Lyn Financial Services

Mark Hughes & Associates

Moneyfax

Monopoly Financial Consultants

Newell Palmer

Nick Davies

Old Mutual Wealth

Premier Wealth Management

Robert Goodman Associates

Sanlam UK

Sense Wealth Management

Sims Financial Planning

Steve White

The Acumen Investment Partnership

Thomas Heald

Tilney

Zimb Johnson Bespoke Financial Planning

British Steel

Active Wealth

Bellpenny

Sandringham Financial Partners

Aviva

Hargreaves Lansdown

Table of Contents

Table of Contents

1. Executive Summary

1.1 The UK financial advisor market is encountering headwinds

1.2 Key findings

1.3 Critical success factors

2. Market Overview

2.1 The number of firms is flat but advisor numbers are up

2.2 Consolidation activity has been significant, with the number of smaller firms starting to decline

2.3 Average revenues have grown strongly since 2016, although growth tapered in 2019

2.4 Financial advisors are the leading channel for pensions and investments

2.5 The affluent are the bedrock of the IFA market, although the drivers for advice changed in 2020

3. Opportunities and Threats for Financial Advisors

3.1 Threats: COVID-19, Brexit, and a market downturn top the concerns of advisors

3.2 COVID-19 has presented numerous challenges to advisors, but opportunities can also be found

3.3 The full implications of Brexit are still unclear

3.4 Banks have a limited presence in the financial advice landscape, but are strengthening operations

3.5 Opportunities: Changing fee structures as well as the aging UK population are key prospects for advisors

3.6 Increasing the transparency of fee structures is considered a key opportunity by financial advisors

3.7 The aging population provides IFAs with steady growth of a core market

3.8 Younger clients are a relatively untapped market for IFAs, but advisors should take notice of banks

4. Working with Financial Advisors: Platforms and Investment Management

4.1 Service provision: Platform usage is an intrinsic part of advisor operations

4.2 Service provision: The use of multi-asset funds and model portfolios is increasing in investment management

5. Appendix

5.1 Abbreviations and acronyms

5.2 Definitions

5.3 Methodology

5.4 Secondary sources

5.5 Further reading

List of Tables

List of Tables

Table 1: Selected financial advisor acquisitions 2020, part one of two

Table 2: Selected financial advisor acquisitions, part two of two

Table 3: Average revenues (£) of financial advice firms, 2016–19

List of Figures

List of Figures

Figure 1: The number of financial advice firms is slowly falling while the number of financial advisors is rising

Figure 2: 85% of financial advice firms had independent status in 2019

Figure 3: The number of mid-sized and large financial advice firms is increasing

Figure 4: Consumers primarily engage financial advisors for investments and pensions advice

Figure 5: IFAs are the preferred source of advice for pensions and investments

Figure 6: Financial advisors account for the majority of retail investment and pension sales

Figure 7: Financial advisor firms dominate the investment advice landscape in terms of number of advisors

Figure 8: Mass affluent individuals account for the majority of financial advisors’ AUA

Figure 9: Saving and investment product holdings increases in line with affluence

Figure 10: Concern about leaving a legacy or inheritance tops the drivers of why individuals seek an advisor

Figure 11: Full withdrawal is the most popular option – in most cases without advice or guidance

Figure 12: Reputation is a key consideration for those seeking financial advice

Figure 13: Unsurprisingly, the business impact of COVID-19 is the chief worry among financial advisors

Figure 14: Post COVID-19, many advisors are seeing greater openness to new investment ideas

Figure 15: The FTSE 100 had a rocky ride in 2020

Figure 16: Examples of UK banks’ robo-advice services

Figure 17: Increasing transparency of fee structures is cited as the number one business opportunity for financial advisors

Figure 18: The number of DB to DC transfers received has fallen significantly since mid-2018

Figure 19: By 2025, the number of individuals aged 65+ with liquid assets over £50,000 will surpass 5 million

Figure 20: As per pre-COVID-19 estimates, the over 65 population was set to steadily increase year on year to 2030

Figure 21: The use of IFAs to arrange investments increases in line with age

Figure 22: Investors aged 18–34 are most likely to use free advice services or an advisor at their main bank to arrange investments

Figure 23: Younger individuals are most likely to have started a pension due to auto-enrollment

Figure 24: The propensity to work with multiple platform providers increases in line with firm size

Figure 25: 20.1% of financial advisors seek an easy-to-use interface for their platforms

Figure 26: From a product perspective, advisors are turning to platforms that offer strong investment returns

Figure 27: Lower costs and price are the key factors that would make financial advisors switch

Figure 28: Aviva is the most used platform provider

Figure 29: Personal client assets are spread across a broad range of investment management approaches

Figure 30: The ability to allow advisors to focus on financial planning is the key draw for outsourcing investment management

Figure 31: The key requirement financial advisors have of DFMs is a wide range of traditional investments

Figure 32: Barclays Investment Solutions is the most commonly used investment manager by financial advisors

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