A combination of increasing regulation, technology-powered advice, a desire for independence over consolidation and an ageing adviser population will have a significant impact on the shape of the advice sector in 2023, according to ValidPath.
Looking ahead to the next 12 month, the adviser network said advisers will continue to shoulder extra regulatory responsibilities as the FCA continues to raise its expectations for reporting and supervision.
Angus MacNee, CEO at ValidPath, said: “As we enter 2023, I expect that the FCA will continue to focus on its current priorities and the new regulatory regimes it has put in place. These are not tick box exercises and they have put a lot of additional responsibility on the shoulders of intermediary firms and senior managers.
“It is for these reasons that having good technology and scalable systems will be key to managing the increased compliance requirements while being able to maintain a compelling and profitable proposition for advisers and clients.”
According to MacNee, technology will play an increasingly important role in how advisers service their clients, with advice becoming more reliant upon real-time information and insights to support clients. This information can be updated in real time from existing datasets from APIs such as Open Banking.
MacNee explained: “This information can be analysed in real-time with respect to an individual’s objectives and the insights used to manage ongoing suitability and provide meaningful solutions to support better client outcomes.
“It is our view that dynamic data will begin to influence the way financial advisers help their clients, as a dynamic approach to financial advice and managing client suitability can provide better client outcomes to more clients with less risk.”
The importance of independence is also likely to become a key theme over the coming 12 months as the FCA implements a regulatory regime that aims to support better client outcomes, said MacNee.
In addition, MacNee believes there is a growing realisation by many advisers that they want to have independence of business model and independence of approach for how they service their clients.
he said: “Independence is everything and it is what ensures that advisers can serve the full spectrum of clients via the full spectrum of products and platforms in their best interest.”
Finally, the advice industry will also experience the impact of an ageing adviser population going forward, with half of all advisers expected to retire in the coming years. This raises a question mark over what will happen with advisers’ client base, said MacNee.
He added: “Advisers have historically had limited options to sell and retire; they could seek to do it themselves which is time-consuming, disruptive and difficult, or they could sell to a consolidator. For those that value independence and what is in the best interests of clients and staff the consolidator option can be very unappealing.
“I strongly believe that the UK financial advice sector is well positioned to continue to serve a large and growing market demand for financial advice, and those firms that embrace technology, independence and focus on what is in the best interests of clients will be well positioned to thrive.”
