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

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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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.