The advice gap will worsen in the near term as businesses struggle with urgent economic and regulatory concerns due to the state of flux in the advice sector, according to the latest research paper from independent consultants AKG.
Research from independent consultants AKG, which aims to provide useful perspectives on important issues and chances for continued dialogue, finds that advising firms prioritise short-term business plans above long-term business strategies in favour of bringing in new business and navigating legal and economic obstacles.
Among the key findings are predictions that M&A activity in the adviser industry would continue to pick up steam over the next two to three years, with 21 per cent expecting significant expansion and 65 per cent expecting further momentum.
The research also found that concerns over the continued operation of business advisory services were primarily sparked by marketing costs and difficulties in attracting new customers at 40 per cent, political uncertainty or geopolitical events at 38 per cent, and legislative or regulatory change at 37 per cent.
According to consumer research, 25 per cent of customers had seen a financial consultant within the last five years.
Furthermore, in the previous five years, 25 per cent had visited a financial adviser. Human understanding is valued at 19 per cent in ongoing partnerships, whereas peace of mind is valued at 19 per cent.
Consumers who are not consulting advisers cited reasons like insufficient wealth at 21 per cent, cost concerns at 21 per cent, and self-sufficiency at 20 per cent.
AKG director of communications Matt Ward says: “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. Our previous FoA paper was dominated by Covid-19 factors and associated industry impact/responses.
“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.
“But many of the crucial requirements for advice market development, despite some pockets of progressive activity, remain the same, including the need for concrete initiatives to better define the borders between information, guidance and advice, and serious contemplation of measures which can help to help bridge the advice gap in the UK. Alongside these is the continued requirement for better integration and progressive use of technology across the advice value chain.”
Canada Life managing director, retirement Tom Evans says: “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. Some people feel confident now but worry about changing rules and regulations adding complexity in the future. Others wouldn’t see a financial adviser at all – even if professional advice was offered for free. Unpicking these 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. It is our hope that our partners and intermediaries find the paper as valuable and insightful as we did.”
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