UK Financial Advisors 2019: Trends, Concerns, and Opportunities

Table of Contents

1. EXECUTIVE SUMMARY

• 1.1. The UK financial advisor market is performing well financially, but the shape of the market is changing
• 1.2. Key findings
• 1.3. Critical success factors

2. MARKET OVERVIEW

• 2.1. Growth in the number of financial advice firms and financial advisors is leveling off
  • 2.1.1. There were 5,246 financial advice firms at the end of 2018, a dip from the 2017 high
  • 2.1.2. The effects of industry consolidation are largely being seen among mid-sized firms
  • 2.1.3. The majority of financial advisor firms are independent
  • 2.1.4. Average revenues from retail investments are on the up
• 2.2. Financial advisors are the leading channel in the sale of pensions and investment products
  • 2.2.1. Financial advisors accounted for 56% of pensions and retail investment product sales in the first half of 2019
  • 2.2.2. Outside of pension investments, investors tend to arrange investments directly or via a financial advisor
  • 2.2.3. The expertise of financial advisors is the key draw for investors
• 2.3. Affluent individuals are the mainstay of the advice market, with retirement a key prompt for seeking advice
  • 2.3.1. Drivers for seeking financial advice center on changes to employment

3. OPPORTUNITIES FOR AND THREATS TO FINANCIAL ADVISORS

• 3.1. Threats: Brexit is currently the chief worry for financial advisors, with concerns over regulation lessening
  • 3.1.1. Advisors are particularly concerned about the impact of any financial downturn resulting from Brexit
  • 3.1.2. In relative terms, compliance with regulation is less of a concern than in previous years
• 3.2. Financial advisors are most concerned about Brexit, followed by fears of a potential downturn
  • 3.2.1. The UK’s financial markets have recovered since the post-referendum drop, but are falling once again
  • 3.2.2. Advisors servicing British expats in Continental Europe face particular challenges
• 3.3. There are concerns over the tax treatment of pensions, with tapered annual allowances causing particular disruption
  • 3.3.1. There are calls from some industry bodies and providers for the government to review tax treatment of pensions
  • 3.3.2. The tapered annual allowance is causing particular disruption in public sector pensions
  • 3.3.3. The netpay anomaly is a growing issue that affects lower-paid individuals
• 3.4. Opportunities: targeting the young and the growing aging population are considered key opportunities for advisors
  • 3.4.1. Financial advisors see notable opportunities in targeting younger clients
• 3.5. Appealing to a younger generation will be key for broadening out a financial advisors’ client base
  • 3.5.1. Older investors are much more inclined to use an IFA than younger investors
  • 3.5.2. Auto-enrollment is an opportunity to engage with investors earlier on
  • 3.5.3. The Pensions Dashboards project is also seeking to drive engagement with retirement planning from an earlier age
• 3.6. An aging population presents a growing core target market for financial advisors
  • 3.6.1. By 2030 there will be 5.8 million additional adults of pensionable age
  • 3.6.2. The aging population will have not just retirement planning requirements but also social care funding needs
• 3.7. Financial advisors could do more to improve the transparency of financial advice fees
  • 3.7.1. There is notable variation between how firms present the cost of advice, rendering price comparisons difficult
• 3.8. Increasing numbers of advisors are seizing on the DB to DC transfer opportunity, but they should tread carefully
  • 3.8.1. The number of DB to DC transfers continues to increase
  • 3.8.2. Data collected by the FCA from those with the DB Transfer Advice Permission has raised misgivings over advisor practices

4. WORKING WITH FINANCIAL ADVISORS: PLATFORMS AND INVESTMENT MANAGEMENT

• 4.1. Service provision:Platform usage is a core part of advisor operations
  • 4.1.1. Over 80% of the financial advisor market use or are planning to use a platform in the coming year
  • 4.1.2. Ease of use is the key requirement that advisors have of platforms, but lower costs would be the greatest incentive to switch
  • 4.1.3. Aviva is the most used platform by financial advisors
• 4.2. Service provision: Investment management is typically kept in-house, though outsourcing allows advisors to focus on clients and planning
  • 4.2.1. Financial advisors are predominantly keeping investment management in-house
  • 4.2.2. The ability to focus on financial planning is the key draw for those financial advisors that choose to outsource
  • 4.2.3. Concerns regarding the impact to client relationships is the key barrier to outsourcing

5. APPENDIX

• 5.1. Abbreviations and acronyms
• 5.2. Definitions
• 5.3. Methodology
  • 5.3.1. GlobalData’s 2019 UK Financial Advisors Survey
  • 5.3.2. GlobalData’s 2019 Banking and Payments Survey
  • 5.3.3. GlobalData’s 2019 UK Life & Pensions Survey
• 5.4. Secondary sources