Financial advisers in the UK are extremely concerned by the current inflationary environment which has reached levels not seen in more than four decades.
A study of 266 advisers carried out by CoreData found that inflation is the number one challenge they are dealing with both in terms of business operations and of clients.
Around a third (31%) of respondents claimed the inflationary environment is the “single biggest challenge” their business will face over the next year.
This was followed by volatile markets (21%), the war in Ukraine (16%) and regulation (14%).
Despite the inflationary struggles, CoreData discovered that advisers have been reluctant to pass on the higher costs to their clients. Only one-in-seven polled said they were forced to increase fees in line with inflation.
Tech to the rescue?
There seems to be a concerning belief, however, that the skyrocketing levels of inflation will widen the advice gap, as reported by 46% of advisers. Just 11% said this would not be the case.
But respondents think there is a way to avoid pricing clients out of financial advice.
Unsurprisingly, the one solution most agree on is technology. 41% believe digital advice offerings will be key to close the advice gap, while only 19% disagree.
Those more inclined to turn to technology seem to be advisers serving the mass affluent market, but 27% of all respondents plan to use tech to target investors lower down the wealth scale.
The number increases to 30% for those serving high net worth clients as well.
“The advice gap is a long-standing industry issue but these findings show there is now real concern that decades-high inflation, which is fuelling the cost of living crisis, will exacerbate the situation,” said Andrew Inwood, founder and principal of CoreData.
“However, advisers also recognise that technology can help fill the yawning advice gap. Indeed, the rise of hybrid advice, along with subscription-based models, could prove instrumental in making advice more affordable and accessible.”
