Financial advisers across the UK had a positive 2019, in terms of growth in turnover and number of clients, a survey by global data provider FE Fundinfo found.
Of the 271 advisers surveyed in November and December, 79% said they onboarded more clients compared to the previous year, with only 1.4% claiming they had fewer customers.
More than half said their annual turnover grew by at least 5%, while nearly a third reported an increase of over 10%.
But to meet the growing demand for their services, advisers are more often turning to third parties to manage their investments propositions, and as many as 57% admitted to using managed portfolios and third-party models – up from 50% in 2018.
Rob Gleeson, head of FE Investments, said: “It’s not surprising that IFAs are turning to third-party providers.
“Most IFAs are not investment professionals, but rather lifetime financial planners. Many recognise that they are not experts in fund selection, so prefer to concentrate their time on providing due diligence around those that are.”
Buried by costs
Despite the rosy business outlook, UK advisers also had to cope with rising costs and regulatory compliance.
Nearly 85% of advisers said they saw operational costs increase in the last 12 months, and more than half claimed regulatory burdens as the main concern for their businesses.
In addition, 33% claimed staffing to be a big issue, followed by professional indemnity insurance (27%), reporting concerns (26%), and rising costs of technology (15%).
When it came to investment choices, 62% of advisers still believe their clients don’t fully understand what ESG investing involves, but more than half said they already factor in environmental and sustainability criteria in their propositions, with 37% claiming they will start doing so shortly.
Mikkel Bates, regulation manager at FE Fundinfo, said: “Investors may have a broad sense of what ESG investing involves, but it is unlikely that many have considered the practicalities of how, for example, an environmentally-friendly investment may not be sustainable, or vice versa.
“There is a huge difference between how ‘responsible’, ‘ethical’ and ‘sustainable’ investing is perceived and, as an industry, we must do more to provide clarity and transparency.”
Focus on retirement
Last year also saw a greater number of advisers offering retirement planning (48%), compared with just 34% in 2018, FE Fundinfo found.
The data provider said that, since the Financial Conduct Authority is looking to roll out retirement pathways for non-advised clients during 2020, this area of financial planning could be a business growth area for many advisers.
Rob Gleeson, head of investments at FE Investments, said: “Prior to the introduction of pensions freedoms, planning for retirement was fairly simple. Investors would invest to accumulate and then pay into an annuity.
“But now, even for those investing in vehicles like self-invested pension plans (Sipps), there is no guarantee of long-term income.
“We need to reframe attitudes to risk in retirement in order to provide a long-term sustainability of income,” he added.
