Advice firm owners bullish as majority (80%) report increased turnover, though energy levels are lagging
The lang cat’s seventh annual State of the Advice Nation (SOTAN) report published today reveals new optimism amongst adviser firms. SOTAN is one of the largest advice-focused attitudinal studies in the UK with over 500 members of the advice profession taking part.
This year’s findings show that the majority of business owners (80%) reported increased turnover, and more than two-thirds (68%) anticipate higher profits for the year ahead. This represents an increase of around 50% compared to last year – the most positive outlook that the lang cat has seen since 2021 in the wake of post Covid money flooding into investments alongside strong market performance.
Q: Looking at 2024 compared to 2023, what do you expect your profit outlook to look like year on year?
What’s keeping business owners awake at night?
While most firms reported a successful year, SOTAN found energy levels across the profession low. When asked what’s keeping business owners awake at night fears of further regulation continues to be the most dominant theme for a third (31%) of respondents. There’s a general consensus that there’s too much regulation and it’s becoming too hard to keep on track. Their second major concern is staffing and finding the right people to join their businesses (15%).
Q: What keeps you awake at night?
Frustration with Consumer Duty
Given the efforts being expended by advice firms in implementing regulation, there is clear frustration over what they feel is a lack of progress spanning all the Consumer Duty outcomes. Over 20% rated progress overall as a ‘waste of time’. This jumps to over 40% for the Customer Support outcome, where firms should monitor if customers feel they’re getting the support they need. The findings reflect a growing feeling that the regulation hasn’t delivered the positive change intended or had an impact in the right places.
Q: Overall, how would you rate sector progress against the following factors?
For firms more broadly, 29% say provider inefficiencies present the biggest challenge to their work. Many respondents emphasised the need for real provider support on key issues like pension transfers and Letters of Authority; changes that would benefit firms, the wider industry and consumers.
The rise in consolidation
The activity of consolidators continues at pace, with more than 30 firms actively acquiring businesses nationwide. Looking at future advice business ownership, 15% of owners expect to sell to a consolidator within the next five years. This figure jumps to over one in four for those nearing retirement, up from just over one in five in 2024.
Q: In five years’ time, who do you expect your business to be owned by?
Newcomers to the industry
In a SOTAN first, this year’s report includes a dedicated section on those new into the profession. The main driving force behind their career choice is the opportunity to help people (41%), followed by an interest in the subject itself (31%) and for the clear career path available (31.5%).
However, when asked about any unpleasant surprises since starting work, nearly two thirds (62%) quoted the regulation and bureaucracy to contend with and the amount of paperwork still used (65%).
Q: Have any of the following been a pleasant or unpleasant surprise about the profession and wider sector?
For the second year running, SOTAN has also sought the views of paraplanners on issues including how their roles are perceived by others in the sector as well as the biggest blockers to them getting on with their day-to-day work. Provider admin tops the list here for 46% of paraplanners. Further findings will be published in Q2.
Steven Nelson, Insights Director at the lang cat said: “With SOTAN in it’s seventh year, we now have the most comprehensive data set ever. We’ve had a 25% jump in response rates compared to last year and it’s incredibly encouraging to see more paraplanners and newcomers to the advice profession participating, enabling us to capture voices from right across the profession.”
“While the industry outlook is positive, the growing burden of regulation is clearly taking its toll, as well as managing the day-to-day demands of running a successful and profitable business. But firms are open to regulation having a meaningful impact in the right areas, with the majority looking for a more proportionate approach that they believe could positively affect client service or fee levels.”
