The heightened consolidation activity and high M&A valuations in the UK financial advice sector has made advisers plan for their exit.
Dynamic Planner surveyed 348 financial advice professionals and found around 8% of advisers are looking to sell their business and/or exit the industry within the next five years.
For sole traders specifically, this number increases to 23%.
The research also found that half of all respondents stated that the burden, cost and pressure of regulation is currently a significant challenge for their business. The number increases to 62% for sole traders, but the challenge is constantly mentioned by firms of all sizes.
Positivity
But it is not all doom and gloom for the UK financial advice industry.
The majority of advisers are looking to grow their businesses over the next five years. Mid-sized firms with between 6 and 49 advisers are the most likely to be actively seeking growth.
Most expect to expand their businesses organically by growing client assets and increasing headcount within their firm, while around one-in-10 firms are looking to acquire other businesses.
The research also found tat, over the last three years, and against the backdrop of the pandemic, 50% of advice firms increased adviser numbers.
Some 38% of companies saw new client enquiries increase during the past 18 months. Close to half expected to increase client numbers over the next three years, and one-in-seven expects to increase numbers significantly.
Additionally, 80% of individuals working for financial advice firms would recommend financial planning as a career, demonstrating the industry’s overall confidence in the future. Women are especially positive, with 88% of respondents recommending financial planning as a career.
‘Resilience and adaptability’
Ben Goss, chief executive at Dynamic Planner, said: “The advice industry has always been characterised by two main attributes – resilience and adaptability.
“These characteristics have recently been tested like never before, and we wanted to understand the challenges advisers are currently facing and the level of confidence in their plans for the years ahead.
“What we found is that advisers are facing into the future with confidence, with the majority happy enough to recommend it as a career choice. Many, particularly younger advice professionals, are confident that client numbers will increase in the years ahead, with the tailwind of the pandemic continuing to drive consumers towards financial advice.
“Of course, events of the past 18 months have accelerated the use of technology to enable remote delivery of advice, and most advice firms expect to continue with some form of hybrid working.
“However, significant challenges remain. Time spent on regulation and back-office activities has increased in recent years, often to the detriment of time spent with clients. Reducing the time and cost to serve clients, whilst maintaining high levels of engagement and demonstrating value, is a big issue for advice firms of all sizes.
“Technology is undoubtedly the key to unlocking this potential, with the majority of advisers saying it is improving their ability to serve clients.”
