The impact of COVID-19 market volatility on UK advice practices has been dramatic. Advisers are facing a significant threat to revenue whilst dealing with the massive task of helping clients manage market volatility. According to NMG Consulting, these twin pressures could reshape the UK advice market in coming years.
NMG Consulting UK Adviser Market Volatility Pulse survey covered 209 UK financial advisers, (70% independent/30% networked) between April 1st and April 13th, 2020.
The impact on advice practices has been much worse than expected
On the revenue side, the sharp sell-off in asset markets has cut balances and means future investment flows are likely to slow. Some 57% of advisers have clients enquiring about freezing or reducing contributions. Over half (53%) have had clients enquire about withdrawals.
According to the NMG survey, the Covid-19 crisis has done more damage than many expected, even in an industry where managing volatility is part of daily life. While 64% said the impact was in-line with expectations, 6% said it was worse than expected and 20% cite the impact as much worse.
Mark Fox, Principal Consultant said, “The financial advice industry is reeling. A sharp sell-off in asset markets has slashed client balances and forward volumes are under pressure. New business activity has frozen, contributions are down, and clients are enquiring about withdrawals.”
Conversely, “The crisis has created opportunities for advisers to deliver value to their clients. As the economy emerges from COVID-19, advisers who have performed well during the crisis will be in a much better position to retain clients and generate referrals for new clients. Those who haven’t performed as well may find themselves under pressure.”
Fox continues: “A freeze in sourcing new clients is a potential missed opportunity. Some clients will find it harder to afford advice but the crisis may lead others to seek advice for the first time. We have seen this markets such as the US, where the increase in inbound communications has been from new clients, some of whom are seeking advice for the first time.”
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