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Costs, clients and challenges: Where does your firm fit in today’s advice market?

Money Marketing yesterday examined the extent of advisers’ regulatory cost burden following research carried out by Aviva.

Conducted with 1,500 advisers, the research looked at a wide range of factors on how the advice market is changing.

Here we take a closer look at the wider findings:

Active Clients

Of the advisers polled, 64 per cent said the size of their active client base had increased in the last year. The results indicate a significant increase in the number of active clients being serviced by advisers.

When quizzed on the same question in September, just 28 per cent of respondents told researchers the size of their active client base had gone up.

Aviva 1

New Clients

Advisers report that a large proportion of new clients have never received financial advice before. Former bank or building society clients were another rmain source of new business, while 34 per cent of those surveyed said most of their new business was coming from former clients of rival advice firms. Among those advisers that cited other sources for new clients, most pointed to referrals and recommendations.

aviva 2

Regulation 

Most advisers still cite regulation and associated costs and levies as their key concern for the year ahead.

Year-on-year concern over regulation is up, with 48 per cent of respondents listing it as a main concern.

Concerns over profitability also remain, and advisers continued to see professional indemnity cover and rules on legacy commission as their key challenges. 

One in ten advisers said the FCA’s inducement rules were among their main concerns.

Click graph to enlarge

aviva 3

Platforms

Advisers are becoming increasingly sensitive to the differences between competitors when choosing a provider.

Asked if they were planning to change their primary platform provider, 14 per cent said they were looking to change.

Among those looking to move to a different platform, 71 per cent said functionality was a key reason, value for money was selected by 69 per cent, while 41 per cent were concerned about financial strength.

aviva 4

Opportunities 

Asked to select the biggest opportunities for their business, 66 per cent of advisers pointed to George Osborne’s Budget pensions bombshell as a main opportunity. 

Similarly, growth in the at-retirement market is viewed as an opportunity by 60 per cent, although just 53 per cent are currently capitalising on that. 

The latest stats show a drop-off in advisers that see reduced competition post-RDR as a cause for optimism.

In September, 45 per cent said they saw adviser exits as an opportunity but that figure dropped to just 30 per cent in March.

Click graph to enlarge

aviva 5

New Hires 

Some 69 per cent said they were not looking to recruit in the next year. 

Graduate recruitment was cited by 3 per cent as a hiring strategy for the next 12 months, while 6 per cent are looking to train up paraplanners working in the business and 26 per cent say they will be hiring from outside the firm.

Further survey feedback shows one adviser said hiring plans were being scuppered because: “The standard of people in the market is appalling and the development cost of graduates is too high.” Another said they would hire “subject to new FCA fee tariffs.”

aviva 6

Online Advice 

34 per cent of those polled told Aviva they were keen to develop an online advice proposition for lower value clients. 

But the results indicate concern over-regulation is hampering progress with 14 per cent saying they were keen to develop something but were waiting for more FCA guidance.

The regulator is currently conducting a review of non-advised and simplified advice sales and is planning to publish the findings shortly. FCA technical expert Rory Percival has said that the regulator does not want to stand in the way of development on simplified advice.

Click graph to enlarge

aviva 8

Turnover

With profitability and FCA rules on legacy commission high on the list of concerns for advisers, maintaining turnover will be key. 

Aviva’s stats indicate almost half of advisers are firms with an average turnover of less than £240,009. At the opposite end of the scale 18 per cent say their firm have a turnover of more than £1m. 

Among those surveyed, 19 per cent report that their business falls in the £250,000 – £499,000 bracket, 9 per cent say they bring in £500,000 – £749,000 of revenue and 7 per cent says they brought in £750,000 – £1m. 

The headline statistic from the findings found 34 per cent of advisers said they spent between 10 per cent and 14 per cent of their turnover of regulatory costs. Meanwhile, 15 per cent of respondents put the figure at between 15 per cent and 19 per cent of turnover; 10 per cent said it was between 20 per cent and 24 per cent; and 6 per cent put the figure at 25 per cent or more.

Click graph to enlarge

Aviva turnover

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