Adviser profits and turnover growing research shows

The financial advice sector is in a period of strong growth, with four out of five advisers seeing their turnover increase in the past 12 months, and the same proportion expecting this to continue into 2018.

But 7 in 10 advisers fear that domestic political volatility and Brexit could derail this growth, a report from Aegon has found.

The research found 75 per cent of advisers reported a profits increase over the past year and 77 per cent expected to see profits grow in the next 12 months.

The research found more than half of financial advisers see defined benefit transfers as a key growth opportunity, with social care funding and the planned pensions dashboards also key growth stimuli, The research found 53 per cent of advisers see DB to DC transfers as a growth area, with 26 per cent citing the pensions dashboard as a key growth driver and 21 per cent citing social care funding.

The report, which tracks the behaviour, attitudes and concerns of the UK financial adviser market, found the sector to be in rude health, despite a slight fall in the total number of financial advice firms since 2015. It found 76 per cent of advisers expect an increase in clients in the coming year, while just 5 per cent predict that customer numbers will fall. Such is the anticipated scale of demand that 28 per cent of advisers expect to grow their team in the next 12 months to meet it.

While sector optimism is strong, 40 per cent of advisers are concerned that Brexit could hurt their business, while 21 per cent see it as an opportunity. Regulatory change is also a concern for many, with Mifid II cited by 23 per cent as introducing further uncertainty to the path ahead.

Robo-advice divides advisers’ opinions, with 31 per cent expecting to see more demand, while the same proportion see it as a threat. Amongst advisers with average client assets in excess of £200,000, only 10 per cent see it as a threat.

Aegon UK pensions director Steven Cameron says: “From RDR to advising on the pension freedoms, the UK’s financial advice market has been buffeted by its fair share of regulatory headwinds in the past decade, but has emerged stronger and more sustainable; as too have the firms that have proven they can adapt to meet the opportunities change brings. The government’s pension freedoms have given more financial responsibility to individuals approaching retirement, making the role of the adviser a fundamental backbone of our pension system.

“For those advisers that can stay ahead of the curve, all change should be seen as an opportunity to demonstrate added value to both current and prospective clients.”

Personal Finance Society CEO Keith Richards says: “Advisers have good reason to feel positive about the future. Not only is consumer demand for their services continuing to increase, more and more people are recognising the value they bring and even the UK government has mandated regulated advice within their own pension legislation for safeguarded benefits over £30,000.

“Evidence of demand was already present prior to the announcement of pension freedoms as consumers realised the challenges of investing alone in a near zero interest environment and the economic uncertainty ahead. Pensions freedoms has undoubtedly increased demand further for regulated advice opening up a range of new client opportunities for firms with extra capacity. It also provides the advice sector an opportunity to establish an important role in the public’s best interest more broadly going forward.

“Given the demographic and economic pressures facing our economy in coming years, including Brexit and its demand on Government resources, advisers will continue to play a key role in supporting individuals with their financial and social challenges at home. Whatever the outcome of the FAMR, the mere fact that it is a government instigated review with a primary objective of increasing access to advice, is significant in its own right. By working collaboratively with the regulator and Treasury to improve access to financial advice, and by demonstrating the cultural behaviours of the profession, I am confident that we can continue to shift perceptions and encourage greater engagement.”