Table of Contents
Executive Summary
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- The five-year outlook for the financial advice market
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- Figure 1: Outlook for the UK financial advice market, 2023-27
- The market
- There are around 11,200 intermediary firms operating in the UK …
- … generating combined revenues of £26 billion in 2021
- Advisers face a difficult year ahead
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- Figure 2: Number of regulated retail intermediary firms and total industry revenues, 2017-21
- Number of insurance intermediaries continues to contract
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- Figure 3: Number of regulated retail intermediaries, by category of firm, 2019-21
- Firms have only a few months left to prepare for the new Consumer Duty
- Companies and brands
- Most advice firms are small enterprises
- Banks continue to account for a declining proportion of retail investment advisers
- Digital innovation continues apace
- The consumer
- Most people have sought advice about investments, pensions and mortgages
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- Figure 4: Proportion of UK adults who have sought professional financial advice on product/area within the past two years or longer ago, 2022
- A good online presence and personal endorsements help attract new clients
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- Figure 5: Method of sourcing adviser, by age, 2022
- Saving and budgeting are people’s top financial priorities
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- Figure 6: Financial priorities for the next 12 months, 2022
- Just over half of all adults have set themselves a financial goal
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- Figure 7: Financial objectives for the next 12 months, by housing tenure, 2022
- Many more people want financial advice than are currently catered for by the industry
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- Figure 8: Proportion of adults who would like to receive personalised advice, 2022
- Most are prepared to pay for advice …
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- Figure 9: Willingness to pay for personalised financial advice, 2022
- … but few would consider paying more than £500, let alone over £1,000
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- Figure 10: Amount willing to pay for personalised financial advice, 2022
- Digital advice is of most interest to under-55s
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- Figure 11: Attitudes towards digital financial advice, 2022
- Providing quality advice at the right price is key
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- Figure 12: Importance given to how advice is delivered compared to quality and cost of advice, 2022
Issues and Insights
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- Misconceptions about what constitutes “advice” are common …
- … and need to be urgently addressed
- Persuade people to step out of their comfort zone with free trials
- Firms must differentiate services to suit a wider range of consumer needs and budgets
Size of the Intermediary Market
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- The five-year outlook for the UK financial advice market
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- Figure 13: Outlook for the financial advice market, 2023-27
- Number of intermediary firms contracted during the pandemic
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- Figure 14: Number of regulated retail intermediary firms and total industry revenues, 2017-21
- Number of mortgage brokers has grown over the past five years
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- Figure 15: Number of regulated retail intermediaries, by category of firm, 2017-21
- Industry revenues grew across all categories of firm in 2021
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- Figure 16: Total retail intermediary revenues, by category of firm, 2017-21
- Industry fared reasonably well in 2022 …
- … but the outlook for 2023 is more gloomy
Market Segmentation
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- Many intermediaries provide advice on a range of areas
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- Figure 17: Proportional distribution of retail intermediary revenues, by type of business, 2021
- 85% of investment income is generated from fees and charges
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- Figure 18: Proportional distribution of retail intermediary revenues, by charging method and type of business, 2021
- Ongoing charges account for the bulk of advisers’ charging revenue
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- Figure 19: Financial adviser firms’ revenues, by charging basis, 2021
- Financial advisers serve over three million clients on an ongoing basis
Market Drivers
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- Consumers’ sense of financial wellbeing continues to ebb
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- Figure 20: Household financial wellbeing index, 2016-23
- Most people are feeling the effects of price rises
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- Figure 21: Proportion of adults who have been impacted by price increases and related issues, by age, 2023
- Many 35-64-year-olds need help making the most of the limited amounts they can afford to save
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- Figure 22: Current financial situation, by age, 2022
- Challenging conditions increase the need for guidance and advice
Regulatory and Legislative Changes
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- New Consumer Duty comes into force this year
- FCA consults on a new simplified advice regime
Competitive Environment
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- Over 11,000 firms serve the UK’s retail advice market
- Financial adviser population continues to expand
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- Figure 23: Number of regulated firms and staff advising on retail investment products, by type of firm, 2021
- Largest financial adviser firms employ nearly half the adviser workforce
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- Figure 24: Number of financial adviser firms and staff advising on retail investment products, by size of firm, 2019
- Banks and building societies continue to cull mortgage advisers
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- Figure 25: Number of firms and staff advising on mortgages, by type of firm, 2021
- Most mortgage brokers operate at a local level
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- Figure 26: Number of mortgage brokers and staff advising on mortgage products, by size of firm, 2021
- Connells Group is one the UK’s largest mortgage distributors
- Recently acquired online mortgage brokers seek to expand
- 95% of insurance intermediaries are micro or small firms
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- Figure 27: Segmentation of insurance intermediaries, by size of firm based on average revenues, 2021
Digital Developments and Innovation
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- FCA paves the way for further digitisation of advice
- Platforms respond to changing market dynamics
- First Wealth launches hybrid advice platform
- Netwealth unveils a free wealth tracking service and a low-cost financial planning service
Types of Advice Sought
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- Two thirds of UK adults have sought financial advice in the past …
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- Figure 28: Proportion of UK adults who have sought financial advice on specific areas, 2022
- … but a much smaller proportion are receiving advice on a regular basis
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- Figure 29: Proportion of all adults who have sought professional financial advice on specific areas within the past two years or longer ago, 2022
- Mortgage and protection intermediaries serve a broader client base
- Only 37% of over-45s have sought pensions advice
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- Figure 30: Proportion of over-45s who have sought professional financial advice on specific areas within the past two years or longer ago, 2022
- Offer people the chance to try out digital services for free
Sources Used to Find an Adviser
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- Most people find their adviser online or via a recommendation
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- Figure 31: Method of sourcing adviser, by age, 2022
- One in four used an adviser at their bank or building society
- 37% of over-65s had an existing relationship with their adviser
Financial Priorities
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- Shoring up savings and sticking to a budget are the top financial priorities
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- Figure 32: Financial priorities for the next 12 months, by housing tenure, 2022
- Debt repayment is more pressing for young families and mortgage holders
- Certain priorities are better suited to advice, others guidance
- Saving for retirement is not a priority for most adults …
- … including over-55s, many of whom are struggling to live within their means
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- Figure 33: Financial priorities for the next 12 months, by age, 2022
Financial Objectives
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- 56% of adults have given themselves a financial goal this year
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- Figure 34: Financial objectives for the next 12 months, by housing tenure, 2022
- Financial priorities and objectives are closely linked
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- Figure 35: Financial priorities for the next 12 months, by type of financial objective, 2022
Demand for Financial Advice
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- The need for advice is largely being unmet
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- Figure 36: Proportion of adults who would like to receive personalised advice, 2022
- Under-45s are keener on getting advice than over-45s
- More female advisers and role models are needed to address the gender advice gap
- Improve targeting of ethnic minorities and families to capitalise on higher rates of interest
- High level of interest in advice by those prioritising protection insurance
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- Figure 37: Proportion of adults who would/might like to receive personalised advice, by type of financial objective/priority, 2022
Willingness to Pay for Advice
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- 59% of those interested in advice would be willing to pay for it …
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- Figure 38: Willingness to pay for personalised financial advice, 2022
- … but most would not pay over £250 for one-off advice
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- Figure 39: Amount willing to pay for personalised financial advice, 2022
Interest in Digital Advice
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- People are more willing to try online advice since the pandemic …
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- Figure 40: Attitudes towards digital financial advice, 2022
- … but concerns about data security persist
- Quality of advice is more important than the form it takes
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- Figure 41: Importance given to how advice is delivered compared to quality and cost of advice, 2022
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Consumer research methodology
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