United Kingdom (UK) Financial Advisors 2021 – Trends, Concerns, and Opportunities

Pages: 54 Published: March 22, 2022 Report Code: GDFS0367IA

The UK’s financial advisors have proved remarkably resilient to the COVID-19 pandemic, with many reporting an uplift in demand for advice and average revenues increasing for all sizes of firms. However, increasing professional indemnity insurance (PII) premiums and a high Financial Services Compensation Scheme (FSCS) levy are putting pressure on costs, while a looming wave of new regulations is pushing many smaller advice firms to sell their businesses. These pressures along with an influx of private equity money into the industry are fueling a growing wave of consolidation, which is slowly but surely changing the shape of the market. Banks and investment managers are also expanding their wealth operations and are starting to prove a greater competitive threat. 

The UK financial advisors report discusses the key trends shaping the UK market for financial and investment advice over the course of 2021. It covers the size and growth of the financial advice market in the UK (including profitability), merger and acquisition activity, as well as the key threats and opportunities cited by advisors.

What are the market dynamics of the UK financial advisors?

The pace of change in the UK financial advice market has accelerated since the onset of the COVID-19 pandemic. Increases in costs and looming regulatory development have provided a pool of willing sellers and private equity investments have resulted in ready acquirers. From a financial perspective, the sector has proven resilient in the face of the pandemic, with all sizes of firms recording strong revenues. However, the pandemic presented challenges and brought about a new way of working. These challenges meant a number of businesses decided it was time to sell up or join a larger organization. It is thus unsurprising that there were significant levels of M&A activity in the sector during 2021.

What are the critical success factors of the UK financial advisors?

Embrace technology and digitization: Digital transformation can offer several benefits to financial advisors. The development of automated investment services can help engage with smaller-scale and younger investors as automation can be embedded in workflows to help free up advisor time.

Determine your regulation strategy: The proposed Consumer Duty, elements of the Consumer Investments Strategy, plus the Financial Conduct Authority’s (FCA’s) plans around environmental, social, and governance (ESG) investing will bring a considerable workload for advisors. Small and medium advice firms need to consider what support they can access to understand and manage these requirements.

Consider how to bring ESG expertise into advice proposition: Awareness of ESG investing has grown considerably over the last two years. Clients will increasingly be seeking help to understand the huge variety and quality of ESG products on offer. This is an opportunity for advisors to shine and showcase expertise. Advisors should also ensure an ESG offering is embedded into any digital proposition, as many platforms now offer this as standard.

What are the opportunities and threats of the UK financial advisors?

A downturn in the financial markets offers scope for advisors to show their full worth. Furthermore, new business models and increased automation and digitization also present high potential areas for growth. Then there are the benefits of an aging population, which provides financial advisors with ready growth of their core market. Evolution in technology will underpin the development of new business models for financial advice. Many of the banks and investment managers entering the advice space are doing so with automated or hybrid offerings. Some providers are also looking to develop simplified or streamlined advice services. They are considering focused advice offerings, which consider a specific, one-off need, while for others the concept is about offering a “lite” version of their full, holistic service.

One of the greatest ways in which financial advisors can show their value is by guiding their clients through the huge variety and varying quality of ESG investments on offer. The advisors with digital offerings should also consider how ESG can be incorporated into platforms. Many investment app providers offer ESG investments alongside their standard offerings, while other direct-to-consumer providers such are ESG specialists.

One of the greatest issues facing the financial market is improving accessibility to financial advice. For financial advisors, the challenge is finding the balance in offering accessible, affordable services that also enable them to run an economically viable business.

Who are the key players in the UK financial advice market?

Some of the key players in the UK financial advice market are HSBC, Santander, NatWest, Barclays, Raymond James, and Brewin Dolphin.

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Market report scope

Key players HSBC, Santander, NatWest, Barclays, Raymond James, and Brewin Dolphin

Reasons to Buy

  • Understand the latest data on the size and composition of the UK financial advice market.
  • Find out about the latest M&A deals in the consolidating financial advice market.
  • Learn who uses financial advisors and what their motivations are for doing so.
  • Discover what financial advisors consider to be the main opportunities and threats for their business.
  • Ascertain how financial advisors are using platforms and find out which platform providers are their preferred choices.
  • Gain insight into how financial advisors determine their investment management strategy.

Key Players

Raymond James
Brewin Dolphin

Table of Contents

  1. Executive Summary

1.1 Market overview

1.2 Key findings

1.3 Critical success factors

  1. Financial Advice Firms Overview

2.1 The number of advice firms fell by

1.9% in 2020

2.2 Consolidation is leading to the creation of more large financial advice firms

2.3 Average revenues were buoyant in 2020, but rising costs are a dampener on profit growth

  1. Financial Advisors and their Customers

3.1 Financial advisors are the leading channel for investments and pensions

3.2 Financial advisors’ clients tend to be older, affluent individuals

3.3 Retirement is the number one driver for seeking advice

  1. Opportunities and Threats

4.1 Threats: A market downturn, increased competition, and the regulatory burden are the key concerns of advisors

4.2 Financial market downturn: Threat or opportunity?

4.3 Banks and investment managers are increasingly targeting investors directly

4.4 Regulation came to the fore again in 2021

4.5 Opportunities: A market downturn, new business models, and digitization offer the greatest business opportunities

4.6 Developing new business models to improve access to financial advice

4.7 The aging population represents a growth opportunity

4.8 ESG investing is becoming more important to investors

  1. Working with Financial Advisors: Platforms and Investment Management

5.1 Service provision: Platform usage is well established, with a strong degree of competition

5.2 Service provision: The investment management needs of financial advisors are changing

  1. Appendix

6.1 Abbreviations and acronyms

6.2 Definitions

6.3 Methodology

6.4 Secondary sources

6.5 Further reading

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List of Tables

List of Tables

Table 1: Selected financial advisor acquisitions, 2021

Table 2: Examples of private equity investments in the financial advice sector, 2021

Table 3: Planned acquisitions still to be completed or completed early 2022

Table 4: Average revenues (GBP) of financial advice firms, 2016-20

Table 5: Average pre-tax profit (GBP) of financial advice firms, 2016-20

Table 6: Key platform acquisitions, 2016-21

List of Figures

List of Figures

Figure 1: The number of financial advice firms and financial advisors fell in 2020

Figure 2: 85% of financial advice firms have independent status

Figure 3: The number of mid-sized firms dropped noticeably in 2020, while the number of firms with more than 50 advisors continued to increase

Figure 4: Consumers typically use IFAs for pension and investment advice

Figure 5: IFAs are the key channel used for pension and investment advice

Figure 6: Financial advice firms dominate the retail investment advice landscape

Figure 7: Mass affluent and HNW clients account for the majority of financial advisors’ AUA

Figure 8: Saving and investment product holdings increase in line with affluence

Figure 9: The use of IFAs for investment advice increases with age

Figure 10: Retirement is the number one reason that clients seek advice from a financial advisor

Figure 11: The majority of pension pots are fully withdrawn without advice or guidance

Figure 12: 23.3% state that a professional recommendation is the top reason in determining who to consult for advice

Figure 13: 27% of financial advisors consider a potential financial market downturn as their key threat

Figure 14: Over the course of 2021, the FTSE 100 recouped much of the ground lost in 2020

Figure 15: Examples of UK banks’ robo-advice services

Figure 16: 30% of financial advisors consider a financial market downturn as an opportunity

Figure 17: The over-65 population is set to steadily increase year on year to 2032

Figure 18: Savings and investment product penetration increases with age

Figure 19: 18-24-year-olds are more likely to turn to a bank for investment advice than an IFA

Figure 20: Platform usage increases in line with the size of the advice firm

Figure 21: Advisors are placing increasing importance on the administrative and reporting capabilities of platforms

Figure 22: The focus on investment returns lessened in 2021 compared to 2020

Figure 23: Lower costs are a key driver for platform switching

Figure 24: Embark is the most used platform thanks to its acquisition of Alliance Trust Savings

Figure 25: In-house asset management leads the way

Figure 26: 18.2% of financial advisors that outsource to DFMs cite a good investment track record as their number one provider requirement

Figure 27: Barclays Investment Solutions is the most used discretionary fund manager among financial advisors

Frequently Asked Questions

Some of the key players in the UK financial advice market are HSBC, Santander, NatWest, Barclays, Raymond James, and Brewin Dolphin.


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