Consolidation is creating difficulties for advisers who have to balance offering a personalised service to clients with the pressure for increased profit margins from private equity backers.
Anthony Clark, a financial adviser at Flow Independent Financial Planning, said: “I think that as consolidation continues, it remains a difficult balancing act for advisers to be able to continue to provide that close, personal relationship that clients value so highly with the pressure for increased profit margins, which often lead to reduced service levels as clients become more of a commodity for bigger businesses.”
Anita Wright, a chartered financial planner at Ribble Wealth management, agreed that consolidation is becoming increasingly negative for advisers and clients.
“For buyers, clients are often treated as an asset class rather than relationships. The model tends to be about protecting cashflow, cutting costs and sometimes replacing experienced advisers with academy advisers. It rarely improves client outcomes,” she said.
Clark said he believes that recent increases in ‘red tape’ and rising costs are resulting in fewer small firms entering the market and replacing those that are consolidated, which is bad news for both clients and advisers.
“I’ve seen consolidation happening for the last 15+ years, but smaller firms also continued to form, But now, these are perhaps becoming fewer because of the red tape involved nowadays and the increase in costs,” he said.
“I hope that smaller firms continue to appear as I believe they provide a more personal service than the larger companies and continue to provide more ‘local service’ than the large consolidated firms.”
