New regulations are forcing advisers to move higher up the value chain, introducing higher minimum portfolio sizes for clients, says Scottish Widows.
Since the removal of the Lifetime Allowance, 79% of advisers said that ongoing tax and regulatory changes are affecting their business operations. Just over half (51%) of those surveyed have increased their minimum portfolio size in the past year, with the average minimum portfolio now at £117,000, rising to £134,000 for firms with over £500 million in assets under management, according to the Scottish Widows Investor Confidence Barometer.
In the last Barometer, conducted for the Scottish Widows platform by Professional Paraplanner publisher Research in Finance and Censuswide, the average minimum portfolio size stood at just over £100,000, representing a 17% year-on-year increase.
Scottish Widows said adviser sentiment around changes to regulation has been mixed, with half (48%) believing that regulatory and tax changes have positively affected their ability to add value for clients. However, 81% reported a negative impact on their workloads, while 68% said regulatory and tax changes had a negative impact on the cost of doing business.
Meanwhile, the introduction of the Sustainability Disclosure Requirements (SDR) has also been met with mixed reactions, with 43% finding the new labels helpful, while 30% do not.
Looking ahead, Scottish Widows said that technology is likely to feature heavily, with 61% of advisers agreeing that improvements in technology will enable them to look after more clients in five years.
More than a third (38%) of firms surveyed are currently using or testing AI tools, while 46% have not yet adopted AI but are interested in using it, with this figure jumping to 50% amongst firms with more than £500 million AUM.
Despite these advancements, both advisers and clients agree that a human touch remains essential in the advice process. Three quarters (76%) of surveyed advisers believe that digital-only models could weaken the value of financial advice, said Scottish Widows.
This sentiment is shared by a majority of surveyed advised consumers, who prefer face-to-face interactions over phone conversations, video calls, and app interactions, for pivotal moments, such as providing personal financial details (37%), discussing risk tolerance (37%), conducting annual reviews (45%), and planning for significant life changes (45%).
Ross Easton, head of platform proposition at Scottish Widows, said: “While regulatory change has brought with it added complexity and increased workloads, advisers have proved themselves to be flexible and adaptable. Significant shifts, such as the removal of the Lifetime Allowance, also gave advisers an opportunity to showcase to clients the value of advice.
“Our research clearly demonstrates that technology will be crucial to address the key challenges facing the industry, namely the advice gap and the great wealth transfer. That’s why we’re investing £150 million over the next three years to enhance our platform.”
