United Kingdom (UK) Financial Advisors Market Size, Trends and Analysis by Financial Advice Firms and their Customers, Opportunities and Threats, 2023 Update
Summary
The UK’s financial advice market has performed strongly following the initial impact of the COVID-19 pandemic, with average revenues and profits increasing. The composition of the market is steadily changing amid a wave of consolidation thanks to ready sellers and willing buyers. Single advisor firms still dominate, but there has been growth in the number of medium-sized firms. Key financial advisor concerns have changed over the last 12 months, with inflation coming to the fore. An increased focus on environmental, social, and governance (ESG) investing is considered to be the key opportunity in the market; exploring new business models is another.
This report discusses the key trends shaping the UK market for financial and investment advice over the course of 2022. It covers the size and growth of the financial advice market in the UK (including profitability), merger and acquisition activity, as well as the key threats and opportunities cited by advisors.
Scope
- The number of financial advice firms fell by 0.4% in 2021, with 29 fewer firms in the market compared to 2020. Conversely, the number of financial advisors increased by 1.2%.
- Retirement is the number one driver for consumers to seek financial advice, with 17.6% of financial advisors stating it as the key driver. Setting up and selling a business is in second place, cited by 13.1% of respondents.
- In 2022, 38.0% of financial advisors considered rising inflation a key business threat, compared to 16% in 2021. Inflation has reached 40-year highs, with implications for advisors’ businesses and client care.
- Understand the latest data on the size and composition of the UK financial advice market.
- Find out about the latest M&A deals in the consolidating financial advice space.
- Learn who uses financial advisors and what their motivations are for doing so.
- Discover what financial advisors consider to be the main opportunities and threats for their business.
- Understand the current regulatory challenges facing financial advisors.
- Learn more about the growing competitive threat from banks, investment managers, and DIY platforms.
- Uncover the opportunities offered by ESG investing and new business models.
- Executive Summary
- Market overview
- Key findings
- Critical success factors
- Market Overview: Financial Advice Firms
- The number of advice firms declined by 0.4% in 2021
- Table Figure 1: The number of financial advice firms fell, while financial advisor numbers increased in 2021
- Table Figure 2: The number of mid-sized firms recovered in 2021
- Table Figure 3: Restricted and dual status firms represent just over 10% of the market
- Consolidation is changing the structure of the market
- Table Selected financial advisor acquisitions 2022, part one of five
- Table Examples of private equity-backed financial advice firms
- Average revenues and profits grew in 2021
- Table Average revenues of financial advice firms, 2017–21
- Table Figure 4: The number of ongoing clients at financial advice firms continued to grow in 2021
- Table Average pre-tax profit of financial advice firms, 2017–21
- The number of advice firms declined by 0.4% in 2021
- Financial Advisors and their Customers
- The financial advice industry remains focused on retirement
- Table Figure 5: Retirement remains the number one driver for seeking advice from a financial advisor
- Table Figure 6: IFAs are the preferred channel for arranging investments
- Table Figure 7: The breadth of services offered by IFAs is a key draw
- However, financial advice is only reaching a small proportion of consumers
- Table Figure 8: The majority of pension pots are withdrawn without advice or guidance
- Table Figure 9: Traditional banks and building societies remain the first port of call for those opening new investments
- Financial advisors’ typical client base constitutes older, affluent individuals
- Table Figure 10: Mass affluent and HNW clients account for the majority of financial advisors’ AUA
- Table Figure 11: Investment holding is strongest among mass affluent individuals
- Table Figure 12: The use of IFAs for investment advice increases with age
- The financial advice industry remains focused on retirement
- Opportunities For and Threats to Financial Advisors
- Threats: Inflation, a financial market downturn, and the regulatory burden are the key concerns of advisors
- Table Figure 13: Over a third of financial advisors view a potential financial market downturn as their key threat
- Rising inflation has created various challenges
- Table Figure 14: Inflation peaked at 11.1% in October 2022
- Financial market downturn: Threat or opportunity?
- Table Figure 15: The FTSE 100 recorded a strong finish to 2022
- Regulation: Consumer Duty is the key focus for 2023, but there is other regulatory activity to be aware of
- Competition from banks and investment managers is increasing
- Table Figure 16: Examples of UK banks’ robo-advice services
- Table Figure 17: M&G Wealth’s key milestones
- Opportunities: ESG investing, a financial market downturn, and the aging population top the list
- Table Figure 18: 27% of financial advisors consider the increased focus on ESG investing a key opportunity
- ESG investing is considered the number one opportunity by financial advisors
- The aging population and intergenerational wealth transfer bring new opportunities for financial advisors
- Table Figure 19: The over-65 population is projected to increase year-on-year through to 2033
- The emergence of new business models
- Table Figure 20: Delineating between different financial advice and coaching models
- Threats: Inflation, a financial market downturn, and the regulatory burden are the key concerns of advisors
- Appendix
- Abbreviations, acronyms, and initialisms
- Definitions
- Methodology
- Secondary sources
- Further reading
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