The vast majority of advisers are worried about rising costs alongside falling revenues, new research from abrdn has shown.
The investment manager said 85% of advisers expect their operating costs to increase in the next six months and 39% are concerned that cost increases could threaten their business in 2023.
When asked why, advisers most frequently cited increased vulnerability due to falling revenue, either as a result of client’s invested assets decreasing in value (46%) or because clients were taking larger withdrawals from their investments (44%).
Jonny Black, strategic director at abrdn, said: “Advisers are being hit from two sides. Like businesses across the economy, firms are battling cost increases in everything from labour to energy. Meanwhile, as a lot of adviser charges are percentage based, they are seeing reduced fees because revenue has been hampered by recent market performance and because clients have adjusted their investment levels in the cost-of-living crisis. It’s costs up and revenue down for a lot of advisers.”
Black said firms had to “walk a fine line” when managing their pressures, with management teams wary of increasing fees.
The research also showed that 44% have already, or plan to, make changes to their businesses to manage the impact of increased overhead costs. Nearly a third (29%) have or will relocate their office locations, rising to 43% of networked businesses. A similar proportion (28%) are investing in new platform technology, while 26% of firms are or will be increasing fees charged to clients, led by networked businesses (36%).
Black added: “It’s welcome that so many businesses are already turning to platform solutions to help them navigate the period ahead.
“Platform technology and the expertise and resources of platform providers has a central role to play in helping firms unlock all-important operational efficiencies by helping businesses manage workloads faster. The right platform partnerships also support better client outcomes and help improve firms’ service quality. This, in turn, helps firms compete and grow their client bases.
“Firms are facing stiff operational headwinds but this year will bring new opportunities for growth. Ensuring the right technology and partnerships are in place will help put them in the strongest possible position to capitalise on whatever arises and mean they can continue to provide the quality of service that their clients so value.”
