Recruitment appetite for paraplanners has suffered a sharp drop in the past two years, a new report from NextWealth has revealed.
According to the latest Financial Advice Business Benchmarks report, paraplanner recruitment has dropped from 38% in 2021 to 14% in 2023 while recruitment of support staff has fallen from 32% to 12% over the same period.
Heather Hopkins, managing director at NextWealth (pictured), said: “Between tepid markets, rising interest rates and Consumer Duty, financial advice firms are having a rough ride. Is the drop in appetite for recruitment of paraplanners and support staff a sign that tech and AI is having an impact or simply down to advise firms treading water until the economic environment improves and confidence returns. Time will tell.”
The report into the advice market also found that just under one in three advisers (29%) are working with more clients than last year, although this number is down on the 46% reported in 2022. Meanwhile, nearly a fifth (17%) said they have fewer clients, up from 5% last year.
The research also found that the cost of advice is also falling, with the total all-in cost dipping from 1.98% to 1.75% in the past year.
This year has also seen the introduction of Consumer Duty and this is set to have a big effect on firms, with less than four in 10 (38%) believing it won’t have any impact. With firms required to demonstrate their worth to clients, 46% said they use cashflow modelling to evidence the value of advice.
Against this backdrop, one in six (16%) advisers said they are looking to sell the firm or exit the market in the next 18 months, while 48% have been approached by a potential acquirer.
Elsewhere, the report looked at the difference between adviser and financial planner, with 60% of firms preferring to describe client-facing staff as adviser, nearly double the 31% who opt for financial planner. However, planners were found to have higher qualifications and wealthier clients, and more planners increased their number of clients (36%) in 2023 than advisers (21%).
Firms that use the term ‘planner’ were also shown to be more positive than advisers about the future, with 58% planning to grow by increasing assets, compared to 38% of advisers, and 59% planning to increase the number of clients, versus 46% of advisers. More than a third (34%) plan to increase staff, nearly double the 18% of advisers who said the same.
Technology has also become a key focus for firms over the past year, with nearly three fifths (59%) actively considering AI or open to what solutions may come to market. More than two fifths (43%) said they are satisfied with their tech stack, up from 38% in 2022, however 11% said they plan to discontinue one or more partnerships. For nearly half of advisers (44%), preparing client reports is the lengthiest step in the annual client review process, although the time taken to prepare for an annual review meeting has dropped t0 4.6 hours from 5.5 last year.
Hopkins added: “Whether financial advisers are in the eye of the storm caused by continued regulatory disruption coupled with weak markets and higher interest rates or they are just battening down the hatches and the worst is yet to come, we think firms are well set up for growth when markets recover.
“Firms have honed their tech, refined their business models and are putting more resources into client recruitment. This report should be a useful resource to firms looking to compare their business results and future plans against market averages.”
