The advice sector shows “room for growth”, the Financial Conduct Authority said, with opportunities to strengthen capacity and align the profession with a changing client base.
According to the FCA’s financial adviser market study, only around 9% of consumers take financial advice, with advisers largely concentrated on wealthier clients.
The typical adviser has 150 clients with £250,000 assets per client, the findings showed.
The FCA said its survey, which is based on responses from more than 4,100 firms and data on around 31,000 advisers, shows a broadly stable market despite consolidation and shifts in market structure. Although the number of authorised firms has fallen by 15% since 2021, adviser numbers have remained steady at around 31,000.
Large advice groups with over 50 advisers account for just 1% of firms but provide advice on half of all client assets, while a long tail of smaller firms continue to serve a wide and diverse client base.
The FCA highlighted the “vital role” small firms, with between one and five advisers, play, particularly in local communities. Many small firms plan to grow over the next two years, with 18% planning or considering plans to increase revenue by more than 25%, while 13% are planning or considering increasing their client base by 25% or more.
The survey also showed that 50% of advisers are now aged under 50, with the proportion under 40 growing since 2023.
However, women only account for around 18% of advisers and over half (51%) of multi-adviser firms do not have any women in adviser roles. This is despite women representing a substantial share of demand; around 29% of advised clients are women and a further 31% receive advice jointly with a partner.
In contrast, women are well-represented in paraplanning (48%) and support roles (66%), which the FCA said highlights a “strong foundation of skills and experience” within the sector.
Among advisers under 50, around one in five are women, compared with around one in 10 amongst those aged 50 and over. While representation remains lower across both groups, it appears to be increasing among younger advisers.
As firms adapt their talent strategies, the larger proportion of female advisers under 50 suggests they are likely to play a bigger role in shaping the future advice workforce, the report found.
Role of paraplanning
Firms across the market make extensive use of third-party support, the survey found.
The use of third-party providers is particularly important to small firms, with only one in three (31%) employing paraplanners, compared to 77% of medium-sized and 89% of large firms.
However, the FCA said a large percentage of small firms (36%) do not employ or use third party paraplanners at all, compared to 9% of medium sized firms and 4% of large firms who said the same.
Pensions and retirement core focus
The study found that pensions and retirement income advice remain central to the UK advice market, representing the majority of advice activity.
Retirement is the primary objective for 69% of all advice firms’ retail clients. This includes retirement saving, pension consolidation or accessing pensions at or near retirement.
This aligns with advice demographics; client bases are dominated by individuals aged 45 plus and the shift from defined benefit to defined contribution pensions is driving a structural need for ongoing support.
Meanwhile, saving for other objectives accounts for 23% while goals such as inheritance tax planning (5%) and debt repayment (3%) remain specialist areas at much lower levels.
The survey also revealed that large firms reported that they’re providing less advice (3%) on inheritance tax than medium and small firms (8%).
Ongoing advice
Ongoing advice forms the backbone of the advice model, with around 90% of clients in an ongoing advice arrangement. Female clients are 15% more likely to receive ongoing advice services.
However, oversight of ongoing services varies with large firms reporting reviewing a smaller proportion of ongoing advice files than small firms.
While this may reflect the challenges of dealing with large adviser populations, the FCA warned it also increases the risk that weaknesses in ongoing services go undetected.
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