Financial advisor sentiment seems to be in a positive domain at the moment, with 76 pct of advisors expecting an increase in clients over the next year, according to the Aegon Advisor Attitudes Report which is launched today by the pensions provider.
The research shows that, as pension freedoms take root and savers take more personal responsibility to secure their own financial security, advisors are already seeing a growth in their customer base.
Only 5 pct predict a fall in customer numbers, while 28 pct expect to grow their team in the next 12 months to meet demand.
Keith Richards, CEO of the Personal Finance Society, said: “Advisors have good reason to feel positive about the future. Not only is consumer demand for their services continuing to increase, more and more people are recognising the value they bring, and even the UK government has mandated regulated advice within their own pension legislation for safeguarded benefits over £30,000.”
Over fifty percent (53 pct) of advisors see Defined Benefit (DB) pension transfers as a key growth opportunity, according to the report, with social care funding also featuring highly; meanwhile, pensions dashboards are creating opportunities. Whether this can be described as a wave of opportunity for advisors is debatable, but 17 pct expect growth to be ‘significant’, as they capitalise on these transfers.
DB to DC transfers have emerged as the biggest opportunities for the advice market over the next two years, according to the survey; 53 pct of advisors identify this as a key area of growth.
The report tracks the behaviour, attitudes and concerns of the UK financial advisor market and has found the sector “to be in rude health” it said – despite a slight fall in the total number of financial advice firms since 2015.
Social care funding has also been marked out as a key opportunity for growth by one in five advisors.
However, although they have done little to dampen business optimism, a number of threats are showing up on advisors’ radars and may impact client bases over the next two years. Two in five advisors are concerned that Brexit could hurt business, although one in five (21 pct) view it as an opportunity. Perhaps unsurprisingly, the combination of broader political volatility and Brexit is seen as a key threat by 70 pct of the advisor market; regulatory change is also a worry for many, with Mifid II being identified as potential catalyst for uncertainty amongst 23 pct of advisors .
Richards adds: “Given the demographic and economic pressures facing our economy in coming years, including Brexit and its demand on Government resources, advisors will continue to play a key role in supporting individuals with their financial and social challenges at home. Whatever the outcome of the FAMR, the mere fact that it is a government instigated review, with a primary objective of increasing access to advice, is significant in its own right. By working collaboratively with the regulator and Treasury to improve access to financial advice, and by demonstrating the cultural behaviours of the profession, I am confident that we can continue to shift perceptions and encourage greater engagement.”
The advent of robo-advice is also a topic that divides advis0rs, with 31 pct expecting to see more demand, while the same number of advisers see it as a threat. For advisors with average client assets in excess of £200,000, any concern is much less evident, with only 10 pct viewing it as a threat.
Meanwhile, advisors are as bullish about profits and turnover, with three quarters (75 pct) reporting a profits increase over the past year, and similar numbers (77 pct) expecting to see profits grow in the next 12 months; four in five firms say they have seen turnover grow over the past 12 months, and the same number (81 pct) expect this growth to continue over the coming year.
Steven Cameron, Pensions Director at Aegon UK said: “From RDR to advising on the pension freedoms, the UK’s financial advice market has been buffeted by its fair share of regulatory headwinds in the past decade, but has emerged stronger and more sustainable; as also have the firms who’ve proven they can adapt to meet the opportunities change brings. The government’s pension freedoms have given more financial responsibility to individuals approaching retirement, making the role of the advisor a fundamental backbone of our pension system.
“In our increasingly complex market, it’s important that people seek professional financial advice whenever making significant and life-altering decisions, so it’s encouraging to see that advisors are indeed seeing this growing need reflected in demand. Consumers face increasing choices but there are also significant challenges to be overcome in providing for their financial futures. This is especially the case with the ongoing decline of DB and in this new era of pension freedoms. For those advisors that can stay ahead of the curve, all change should be seen as an opportunity to demonstrate added value to both current and prospective clients.”