Adviser firms boosted retirement focus in 2019

Financial advisers saw their turnover and client numbers grow strongly in 2019, a new study has found. The study by fund data provider FE fundinfo revealed that growing demand for financial advice in 2019 was driven by a number of factors. These included clients’ more complex financial needs, low growth in DIY investing and a lack of realistic alternatives to professional financial advice. The survey, compiled before the Coronavirus outbreak, revealed that: More than 54% of advisers were positive in terms of business outlook than a year earlier. 79% of advisers surveyed reported rising client numbers in 2019, with only 1.4% reporting a reduction. Nearly 52% of advisers reported increased turnover of at least 5%, with almost 30% reporting turnover increasing by over 10%. The report also revealed that many advisers are turning to third parties to manage their investment propositions with a majority (57%) now using third party model and managed portfolios in some capacity, 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.” Retirement planning was seen as a potential growth area and nearly half (48%) advisers have a dedicated retirement proposition compared to 34% the previous year. Mr Gleeson added: “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.” The report also revealed that many advisers are turning to third parties to manage their investment propositions with a majority (57%) now using third party model and managed portfolios in some capacity, up from 50% in 2018. The study found, however, that despite the rise in demand for financial advice, advisers had to contend with rising costs and a greater regulatory burden. Almost 85% of all advisers surveyed reported that operational costs had increased over the last 12 months and over half cited cost and ‘regulatory burden’ as the main concerns for their businesses. Among the costs affecting advisers, 33% said staffing was their biggest concern, followed by professional indemnity insurance (27%), reporting and regulatory concerns (26%) and rising technology costs (15%). The survey found Environmental, Social and Governance (ESG) investing increasingly popular with more than half of advisers using ESG factors in their investment propositions, with a further 37% saying they plan to do so shortly. However there is still room for better understanding of ESG with 62% of advisers saying they do not think their clients understand what ESG investing involves. The survey is available here: 2020 Financial Adviser survey (“Surfing the Wave: How Financial Advisers thrived in 2019 despite rising costs and increasing regulation”) 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.” Retirement planning was seen as a potential growth area and nearly half (48%) advisers have a dedicated retirement proposition compared to 34% the previous year. Mr Gleeson added: “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.” • The 2020 FE fundinfo Financial Adviser survey was conducted in November and December with 271 financial advisers who use FE fundinfo’s FE Analytics tool.

Adviser firms boosted retirement focus in 2019

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