Advice firms remain resilient but macroeconomics dampen turnover predictions – the lang cat research 

by | Jan 19, 2023

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The vast majority of advice firms continue to add clients and three-quarters of them rarely see customers exit their businesses, but the macroeconomic situation has left a significant number of firms predicting a dampened 2022 in terms of turnover figures. 

The lang cat’s fifth annual State of the Adviser Nation (SOTAN) report found one-third (31%) of UK adviser businesses expected their turnover to be down in 2022, while 27% anticipated it would be around level. That compares to 7% expecting a drop back in 2021 and 42% in 2020. 

However, other data the lang cat gathered from 605 advice professionals appears to suggest this lack of confidence in 2022 business performance is mostly due to wider economic factors, rather than any client exodus. 

The research, to our knowledge one of the largest advice-focused attitudinal studies in the UK, also found 76% of firms indicate very few clients leave the firm in any given month. Encouragingly though, the vast majority (94%) indicate they consistently add new clients to their books, even in this harsh environment.

 
 

Growth aspirations also remain high, particularly among larger firms. 

On a scale of 1-10, with a score of 1 being low growth aspirations and 10 representing aggressive growth, the vast majority (89%) of firms with £500m+ in assets under advice (AUA) reported a score of 6 or higher. 

That compares to 59% for firms with £100m to £500m AUA and 38% for firms with less than £100m in AUA.

 
 

Rich Mayor, senior analyst and co-author of the report, says: “Given the harsh conditions we find ourselves in, I’m encouraged that advice businesses continue to be resilient and even smaller firms are adding clients on a regular basis. 

“In turbulent markets more time has been spent reassuring clients of their existing financial plans, and in some instances taking what they see as remedial action if clients have swayed from their paths as a result of markets. We’ve seen a heck of a lot of acquisition activity from consolidators and the largest firms in the UK, and the landscape for this activity remains favourable for those looking to acquire.”

Steven Nelson, insight director and the other co-author, says: “Although there were a greater number of firms expecting to see turnover drop in 2022, we still heard from many that grew during the calendar year with 42% of firms predicting turnover was on the rise. While broader markets have been tough for businesses our data suggests advisers remain as resilient as ever.”

 
 

Considering the report more broadly, Steven adds: “One thing that has been clear in each wave of our research is that we’ve dispelled lingering myths that the advice profession thinks just one way about any particular issue. Nor should it. Whether it’s technology preferences, advice style, investment construction, views towards providers and much, much more – our data illustrates a distribution curve of views rather than a consensus. It makes for fascinating reading for us but a significant challenge for those on the manufacturing side of the sector.

“The closest we see to a consensus is that service levels continue to be the number one determinant of satisfaction, selection and de-selection of providers.

The dataset:

  • 605 financial advice professionals 
  • 46% Owner-adviser, 30% financial planners, 7% paraplanners, and 17% a mix of other roles
  • 57% Directly authorised IFAs, 16% directly authorised restricted, 14% network members, and 9% vertically integrated advice firms 

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