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UK Advisers Fear Economic Uncertainty And Market Volatility As BREXIT Looms - But Income Is Up As Firms Plan Expansion

  • More than twice as many advisers as last year say economic uncertainty is a key concern for the coming year
  • Nearly 4 in 5 (78%) fear market volatility leading up to Brexit
  • But over 30% report annual income of over £1m, compared with 26% this time last year
  • 45% are planning to recruit in the next year,  up from 40% a year ago, and 31% in March 2013
  • Despite the challenging macro environment and concerns around political upheavals, advisers see growing opportunities in retirement planning (75%), financial reviews driven by low interest rates (51%), and increasingly through employer clients (only 24% don’t advise vs 41% last year).
  • Financial stability of platforms is a growing factor for main platform choice – one third of advisers would consider changing platforms because of concerns about financial stability, compared with 24% in May 2015.

Aviva’s new Adviser Barometer shows a doubling in the number of advisers who say that economic uncertainty is a key concern, up from 21% this time last year. The same number also cited the impact of Brexit as one of their biggest concerns, and 39% also thought the Trump victory in the US election had a worrying potential for the future of the advice industry.

However, other indicators show that the financial advice market in 2016 continues to show signs of healthy growth. Over 30% of advisers report their firms’ income is over £1m, compared with 26% at the same time last year, and the number of advisers intending to recruit additional staff in the next year is the highest since the survey began. 45% say they intend to do this, compared with 40% a year ago, and only 31% in March 2013.

Tim Orton, CEO Aviva Adviser Platform, says, “It is no surprise that the sentiment reflected in our latest Adviser Barometer reflects the general uncertainty we’ve seen since the UK vote for Brexit and the Trump victory in the US election. In both cases we are stepping away from the status quo which inevitably invites speculation as to possible outcomes. The good news is that despite all this the advice market in the UK is continuing to thrive, with increasing incomes and plans for expansion reported, and of course the FTSE is at record levels which is good news for investment returns.”

However, there has been little actual change, in adviser or client behaviour, since the June 23rd vote.

84% of advisers report no additional demand attributable to the Brexit vote, and where this has been seen it is largely from clients requiring assurance only (77%). Of the others, 30% were looking to turn cash into investments with almost equal number (27%) doing the reverse (investments into cash).

But 78% of advisers say their main concern about Brexit is potential market volatility, and a further 35% say changes in regulation concerns them.

Only 2% of advisers have reviewed their providers following the Brexit vote, with advisers saying the main reason for staying put is wanting to use firms with more stability (46%), wanting to use UK-based firms (18%), and using firms with a diversified business (16%).

Concerns about the financial advice market, whilst continuing to reflect ongoing issues such as regulatory fees and levies (a concern for 54%) and PI costs (46%), have coalesced around macro factors. Although one in four are still concerned about staying profitable, this has shown a significant lessening of importance from a year ago, where 45% cited this as a key concern.

Tim Orton commented, “The most concerning factors for advisers in the next six months are the ramifications from Brexit and Trump’s presidency, but factors which advisers can control, such as remaining profitable, have become less of a concern for them. I think this is also a reflection of the way the market has grown and strengthened since our survey began back in December 2011. “What is coming through strongly is advisers saying they are putting measures in place to make sure they are in as good a place as possible to meet whatever challenges occur in the coming year – by sticking with financially strong, secure, diversified UK-based companies.”

OPPORTUNITIES

75% of advisers see growth in the retirement market as a main area of opportunity (up from 58% a year ago), and with 51% (vs 30% in November 2015) seeing the increasing need for regular financial reviews as key, there is now a definite focus on these areas in the coming year.

In contrast, growth in protection is cited by 18% of advisers as an opportunity this year, compared with 28% last year, and attracting orphaned customers is mentioned by fewer advisers, down to 19% from 24%.

Tim Orton says, “What is striking in this year’s survey is the polarisation of opportunities within the market. A large majority of advisers now consider retirement planning to be the best opportunity they have, but it is noticeable as well that advisers said frequent financial reviews are now more important than ever, with the low-interest rate environment driving a need for regular reviews to ensure clients are making the most of their investments.”

PLATFORMS

The number of advisers considering changing their main platform is slightly up from last year, with 14% saying they are considering this. However, this level has barely changed since September 2013.

Functionality remains the main reason for advisers considering change, but is relatively less important than previously, with 59% of advisers saying this is the main reason compared with 72% a year ago. Value for money, and cost, are both cited by 48% of advisers as a key reason which shows the importance of balancing these two related factors.

Perhaps as a reflection of the general sentiment of uncertainty, ‘financial strength’ has become more important as a factor behind wanting to change a main platform provider – 33% said this in November 2016, compared with 30% in November 2015, and 24% in May of that year.

Nearly all advisers (98%) conduct due diligence at least annually, with 4% saying they do it more often than that. 13% conduct due diligence with every new client.

Tim Orton commented,“It’s encouraging for us to know that due diligence is an integral part of BAU for advisers. In line with the survey findings we are seeing an increasing number of advisers concerned about the financial stability of their platform as part of their due diligence. At Aviva we’re here to stay and committed to investing in our proposition for the future, enhancing efficiency and functionality for our advisers and their clients.”

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