The advice gap is set to widen in the short-term as the advice market grapples with economic and regulatory issues, a new research paper from AKG shows.
According to the paper ‘Future of Advice – State of Flux’, advisers identified marketing costs and issues with attracting new clients as their leading concern (40%), closely followed by political uncertainty and geopolitical events (38%) and regulatory and legislative change (37%).
The paper, which examines where the advice market currently stands and why it might evolve over the next few years, also found that M&A activity is set to gather pace over the next two to three years, with 65% of advisers predicting it will build further momentum and 21% expecting rapid expansion.
Matt Ward, communications director at AKG, said: “Everyone is evidently busy dealing with important shorter-term issues which in turn is making a clear longer-term prognosis of the future of advice landscape harder to predict.
“To some extent current fortunes are still being heavily impacted by external forces in the form of geopolitical factors, inflationary challenges and the cost of living crisis. Add in a healthy dose of regulatory focus and challenge in the form of Consumer Duty and ongoing review of retirement income advice and it is clear to see why a state of flux exists.”
However, Ward said that many of the “crucial requirements” for market development remain the same, including the need for “concrete initiatives” to better define the borders between information, guidance and advice, as well as a consideration of measures which can help bridge the advice gap in the UK and the need for better integration and use of technology across the advice value chain.
The research, which also surveyed consumers, found that a quarter (25%) of people had seen a financial adviser in the last five years. For those who engage with an adviser on an ongoing basis, access to someone who understands their financial situation was a key driver (19%) as well as peace of mind over financial decisions (19%).
For those consumers who had not consulted an adviser, a fifth (21%) cited a lack of wealth or assets, while the same number said they did not want to pay for advice. Meanwhile, 20% said they do not feel they need to see an adviser due to good financial understanding and the ability to make their own decisions independently.
Tom Evans, managing director, retirement at Canada Life, said: “The industry continues to face change and challenges. Whilst not exclusively down to market volatility, technological disruption or new regulation, these factors have major implications for the advice market, now and in the future.
“The paper delves into how the public regard their own levels of financial knowledge and their need for guidance. Unpicking wary perceptions of the advice industry is not a straightforward task but is vital to understand for adviser businesses not only to survive but indeed thrive. Via ‘State of Flux’ we can begin to understand our collective blind spots and help to recognise how the advice landscape needs to evolve and adapt.”
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