More than two-thirds of financial planning firms confident about growth over next 12-months

• 84% expect assets under management to increase
• 70% of firms are confident about revenue growth
• Regulatory compliance remains biggest challenge for the sector, with firms largely unconcerned by economic uncertainty

Financial planning firms in the UK have a positive outlook for growth in the coming 12-months, according to the inaugural Financial Planning Growth Index from Saltus Partnership Programme and L.E.K. Consulting, launched today.

The new research, based on responses from 200 senior leaders at financial planning firms, found that 70% are optimistic about the next year, with 47% confident and 23% very confident about growing their revenues. Even more, 84%, expect assets under management (AUM) to increase, with just 16% of firms expecting no growth.

There are varying expectations depending on the firm’s size, with larger businesses more optimistic than mid-size and smaller firms. Half (48%) of larger firms – those with AUM above £300m – expect AUM to grow by at least 10%, and one in ten (11%) expect growth of at least 20%. Mid-sized firms still expect growth, but a significant majority (78%) expect this to be more conservative, up to 10% year on year. Just a fifth of mid-sized firms expect growth above 10%.

Smaller firms – those with AUM up to £50m – are the most cautious, with 44% expecting growth to be no more than 5%. 25% of smaller firms expect the next 12 months to be flat or to see a decrease in AUM.

Organic growth is primary growth driver for firms of all sizes

When looking at where firms expect AUM growth to come from, 40% expect organic growth to be the main driver. This is followed by client referrals (32%), improved investment performance (26%), technology and automation (15%), partnerships (10%), and digital marketing or social media (6%). Just 4% of financial planning businesses expect growth to come through acquisition, which is unsurprisingly focused on larger firms, where 18% point to acquisitions as a key growth driver. This compares to just 5% for those with AUM between £50-300m and 1% of firms with AUM below £50m.

Regulatory compliance remains top concern for a third of financial planning firms

29% of firms said regulatory compliance was their primary challenge in the next 12 months. This was followed by political intervention (20%), rising operational costs (19%), economic uncertainty (14%), and talent acquisition (8%). Despite these challenges facing firm leadership, 37% say they are well prepared to meet them and nearly half (49%) feel moderately prepared.

Longer term planning: regulation, technology and the advice gap are primary concerns 

When asked about the prospects and challenges for their business over the next 3-5 years, the evolving regulatory environment remains a major concern, especially for larger firms, with 21% identifying regulatory changes as likely to have the biggest impact on the industry in the next 3-5 years. This is followed by technological advancements including AI (18%) and a widening of the advice gap and the cost to serve (16%). For small and mid-sized firms, technological advancements including AI comes top (18% of mid-sized firms and 21% of smaller firms), followed by changes in the regulatory environment (18% of both mid-sized and smaller firms) and the widening of the advice gap and the cost to serve (16% of both mid-sized and smaller firms).

Firms of all sizes appear relatively sanguine about the impact of economic and market volatility, with just 9% of small firms, 11% of mid-sized firms and 7% of larger firms citing this as the primary challenge over a 3-5 year period. An outlier of note for smaller firms is concern over fewer advisers, where 15% say this as an emerging trend that will have the biggest impact.

Nick Heath, Head of the Saltus Partnership Programme relationship team, said:“Senior leaders in the financial planning sector remain optimistic about the future despite a number of headwinds impacting their businesses. To deliver growth, firms must be adaptable in their approach and focus on streamlining operations, continuing to attract and develop talent and embed innovation to drive the best possible outcomes for clients.

“The role of technology in enabling firms of all sizes to meet these challenges head on and underpin their growth ambitions remains paramount. Innovation is no longer a luxury available exclusively to the largest firms in the market, and the Saltus Partnership Programme is designed to enable firm leaders to support across the piece including financing, access to tech and a range of operational services that will enable growth and continue doing what they excel at, looking after their clients.”

Bronswe Cheung, Partner at L.E.K. Consulting, said: “The outlook for the UK’s financial planning sector is promising. It is clear the way in which firms expect to grow varies, with larger businesses leveraging acquisitions to capitalise on their scale and resources. But driving organic performance remains the key growth driver for firms of all sizes and reiterates the importance of a relentless focus on clients, delivering exceptional service and performance, in delivering growth.

“As financial planning businesses scale, the complexity of delivery increases and can be a barrier to growth. Scale brings added regulatory requirements, a higher cost base and added risk, all of which can stifle ambition if not approached in the right way. There are solutions to these challenges that require an innovative outlook and a willingness to embrace change, working in partnership with others to ensure these growth ambitions can be realised.”

To read the Financial Planning Growth Index from Saltus Partnership Programme and L.E.K. Consulting in full click here.