The adviser to client ratio is set to widen substantially over the next five years, according to a new report from NextWealth.
The average ratio is expected to shift from 1:94 to 1:250, while the fee earner to non-fee earner ratio is forecast to move from 1:1 to 4:1, the research company suggests.
This trend is being driven by improved efficiencies within firms as well as a change in culture across large financial advice firms looking to generate revenue growth.
Heather Hopkins, managing director of NextWealth, said: “We are seeing big changes in the way firms are gearing up for the future. Larger firms in particular are focusing on how they use tech to save time, reduce overheads and service more clients.”
The report ‘Delivering Operational Leverage’ also highlighted how consolidation in the adviser space is creating larger advice firms and these firms are seeking to maximise efficiencies by looking for more and better client data from their back-office system as well as full transaction-level data from platforms to support internal and external reporting requirements.
Hopkins continued: “Large financial advice firms have the clout to demand more of their suppliers and will build their own links in the system of record to support the system of engagement, which includes client portal, cashflow modelling and risk profiler. The system of engagement will either be bespoke built or heavily tailored to suit these firms’ brand and processes requirements.
“They will require APIs from platforms and back-office systems to deliver rising regulatory reporting requirements and a client experience that they define.”
The report finds that small firms will use off-the-shelf solutions, relying on tech partners to deliver required integrations.
According to NextWealth, this shift will require greater customisation of data feeds to advice firms, including commission and fee payments, client data and client portfolio data to feed client portals.
For platforms, this will have various implications, including the need for enhanced APIs to populate data lakes, which are increasingly feeding client reporting engines, client portals, accounting systems and business dashboards. At the same time, NextWealth believes advice firms will work with fewer platforms as they streamline their system of record, while the industry will see the emergence of platform+ models, where the platform offers some services of a back office combined with a client portal and accounting system.
Hopkins added: “Large and small firms alike said they would rely on their tech partners, back office, platform and administrative system providers in particular, to help with the thinking about how to implement AI to automate tasks. Several criticised these firms for not doing enough product development.”
