Advice firms are feeling less optimistic about their growth amid growing economic uncertainty, according to a report by NextWealth.
The Financial Advice Business Benchmark found that the number of firms looking to sell or exit the market has more than doubled to 10% from 4% in 2021.
Meanwhile, recruitment across all roles within firms has fallen from the post-Covid bounce back period, with just 40% of respondents looking to take on new staff, compared to 59% in 2021.
The number of firms reporting an increase in clients also decreased, with 46% of respondents stating that the number of active clients was up year on year, versus 65% who said the same in 2021. However, around half (49%) said their client numbers are the same as last year.
Over the next 18 months, 51% of firms said they plan to grow by increasing client assets under management, down from 69% the previous year, while 13% plan to grow through acquisition versus 18% in 2021.
Heather Hopkins, managing director of NextWealth, said: “Where 2020 was a year of drastic adjustments and 2021 was a year of finding out what the new normal looks like, 2022 sees advice firms becoming increasingly cautious. Advice business remain healthy, client numbers are steady but growth plans are being curtailed.
“After an initial post-Covid bounce back, when advice firms reported a recovery in recruitment and client numbers, this year we see a return to more cautious estimates. After years of optimism, fuelled by rising markets and growing demand for advice, financial advice firms are scaling back their ambitions amid greater uncertainty.”
Hopkins added: “The new Consumer Duty regulation demands a sharper focus on client outcomes. That’s not new for advice firms who have built their businesses around the needs of their clients. However, it does require a new rigour around approaches to assessing suitability, evidencing processes and more clarity on value and fees charged for products and services.”
