Despite nearly one in five adults saying they need advice post-COVID advisers are braced for firms to shut or be sold and more advisers to retire in the wake of the pandemic, research from AKG has revealed.
In its independent paper Future of Advice – Beneath and Beyond AKG found that more than half (53%) of advisers believe firms will shut as a result of the pandemic while 45% expect more advisers to retire and a third (34%) forecast a rise in the sale of businesses.
The research for the paper, sponsored by Canada Life, Charles Stanley, Fidelity FundsNetwork and Intelliflo, also found that at the same time advisers predict demand for their services is growing with 52% saying they will attract more business from existing clients, while 48% expect more work from new clients.
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Research among consumers provides further optimism with nearly one in five adults (17%) – around nine million people – saying they specifically need advice to address financial issues caused by COVID-19.
More than two out of five (44%) are concerned about the financial risks from major shocks such as pandemics.
AKG believes the pandemic is accelerating changes that were already underway as demonstrated by the rise in M&A activity across the sector and the age profile of advisers and calls on the industry to develop a longer-term strategy for increasing the numbers of advisers and clients.
Its paper Future of Advice – Beneath and Beyond outlines the impact on new business from COVID-19 with firms struggling to attract new clients beyond personal referrals while grappling with changes to their service models.
Customers questioned for the study are more than twice as likely to prefer face to face advice – 55% preferred seeing a person to 22% who would prefer to rely on technology. However, advisers are very much embracing technology and see it is a “crucial facilitator” in the long-term future of the market.
AKG’s study found the biggest barrier to consulting an adviser is that many consumers think they don’t need them – 43% of those who haven’t seen an adviser in the past five years believe they have enough knowledge to decide for themselves. Just 27% do not want to pay.
Matt Ward, communications director at AKG, said: “It is difficult for advice firms to think beyond the immediate day-to-day pressures of responding to the massive impact that COVID-19 has had and is having.
“But they need to look to the longer-term and particularly when so many firms are expected to leave the industry at a time when advice is needed so much, and demand is growing.
“Intermediary distribution is the lifeblood of the financial services companies assessed by AKG and so a key part of our work in assessing the operational strength and sustainability of these companies involves close monitoring of the likely future shape of the advice market.
“Through this fresh research and its findings, we wanted to provide a platform for ongoing industry discussion and debate.”
Advisers questioned for the paper stress that they are facing other major issues – their biggest concern is the rising cost of Professional Indemnity Insurance cited by 71% while the other major worries are risk and compliance (51%) and MiFID II/PROD (45%).