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Cathi Harrison asks: What direction for the financial advice market?

19 March 2019

Will we see a shift from smaller to large financial advice companies and what may be in the best interests of the client? Cathi Harrison. MD of Apricity Compliance muses on the current trend for growth and consolidation.

Recently, an article caught my eye in relation to the Pearson Jones name being replaced by 1825, which bought the firm out in 2015. It did so because I was previously employed by Pearson Jones (via a company that they acquired), and also that it had been around since 1983, the year I was born!

I think there is always something a little sad about what was once a small business becoming part of a corporation, and nothing embodies that more than a name and brand change.
It led me to thinking about the financial advice market at present, and the direction it is heading in with large corporates and networks vs smaller independent firms (there seems to be very little in the middle). At one end of the market we have:

  • 1825 charging ahead with firm acquisitions.
  • The new Schroders Personal Wealth proposition looking to hire 700 advisers in the short term.
  • SJP announcing they think 7,000 advisers will retire in the next three years – and that they are best placed to train the replacement generation up.
  • Openwork targeting some of 1,000 + advisers that are being made redundant from banks and building societies.
  • Fairstone securing an additional £30million in funding to enable further acquisitions.

There is definitely a big trend at the moment for growth and consolidation and this will be an interesting end of the market to review. There’s a tendency to assume it just won’t work for these large firms; that they’re underestimating the problems and there’s a general feeling of “seen it before”.

This may well be the case. However, times have changed, technology has changed, lessons may (or may not) have been learned…
At the other end of the scale, the last FCA Intermediary Data report showed that of 5,281 firms, 4,704 (89%) had five advisers or less. And so, we’re a very disparate market at the moment.

And what about the client; what is in their best interest? Clearly there are benefits from both types of firm, the research, resource and security felt by larger firms (not to mention the marketing, SJP being the king in this arena), vs the friendly, personal service, available from smaller companies. What will attract most clients?
While finance is such a difficult topic for many people, and still somewhat of a taboo, the smaller firms will have a competitive edge.

But as the world changes, and people become better educated in their personal finance, and more open to discussing it, will their focus switch to one of literal value, rather than inherent value, and a desire to simply drive down costs and drive up tax efficiency (in which case the SJP freebies may not be as appealing as they once were).
It’s an interesting shift happening, and definitely one to watch in the coming years.

This article was originally published on the Apricity Compliance website