United Kingdom (UK) Financial Advisors 2023
Summary
This report discusses the key trends shaping the UK's financial and investment advice space over the course of 2023 and beyond. It covers the size and growth of the financial advice market (including profitability), merger and acquisition activity, as well as the key threats and opportunities cited by advisors. The report also discusses how market trends such ESG, artificial intelligence, and regulation will shape the sector in the future.
The UK’s financial advice market is undergoing a period of change and evolution. The composition of the market is changing amid an ongoing wave of consolidation thanks to ready sellers and willing buyers. Single advisor firms still dominate the market, but the average number of advisors per firm keeps ticking up, indicating a shift towards medium-sized and large outfits. Financial advisors play an important role in serving retired individuals and those approaching retirement. However, the enduring challenge lies in closing the advice gap, as less than 10% of consumers have accessed regulated financial advice.
Scope
- The number of financial advice firms fell by 1.1% in 2022, with 56 fewer firms in the market compared to 2021. Conversely, the number of financial advisors increased by 1.4%.
- 2023 saw a record number of acquisitions in the advice sector, with over 102 deals recorded. The key drivers for business sales are retirement and the support of a large business.
- 24.8% of investors stated that financial advisors were their preferred channel for arranging investments. 33% of these investors were aged over 65.
- Fewer investors are considering environmental, social, and governance (ESG) factors when investing compared to 2021–22. However, the introduction of new Sustainability Disclosure Requirements should boost confidence in the industry.
- 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 the key trends and themes affecting the financial advice industry
- Understand the current regulatory challenges that financial advisors are facing
- Learn more about how advisors can prepare for The Great Wealth Transfer
- Uncover the opportunities offered by ESG investing and the productivity gains of generative AI
- Executive Summary
- Market overview
- Key finding
- Critical success factors
- Market Overview: Financial Advice Firms
- The number of advice firms fell by 1.1% in 2022
- Table Figure 1: The number of financial advice firms continued to decline in 2022
- Table Figure 2: Small financial advice practices dominate the market, but their numbers are slowly coming down
- 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, 2023
- Table Selected financial advisor acquisitions, 2024
- Table Examples of financial advice firms backed by private equity and other investment houses
- Average revenues and profits grew in 2022
- Table Average revenues of financial advice firms, 2018-22
- Table Figure 4: The number of ongoing clients at financial advice firms jumped in 2022
- Table Average pre-tax profit of financial advice firms, 2018-22
- Table Figure 5: Professional indemnity insurance premiums as a percentage of regulated revenue have continued to increase
- The number of advice firms fell by 1.1% in 2022
- Financial Advisors and their Customers
- IFAs are the go-to channel for investments
- Table Figure 6: IFAs are the preferred channel for arranging investments
- Table Figure 7: The convenience of IFAs is considered a key draw
- Table Figure 8: A third of respondents who favor IFAs for arranging investments are aged 65 or over
- Financial advice is only reaching a small proportion of consumers
- Table Figure 9: Traditional banks and building societies remain the first port of call for those opening new investments
- Table Figure 10: Older consumers place more value on a trusted brand compared to younger generations
- IFAs are the go-to channel for investments
- Key Trends in the UK Financial Advice Market
- A lackluster economy, high inflation, and weak financial markets make for a challenging backdrop
- Table Figure 11: Inflation started to moderate in 2023
- Table Figure 12: The FTSE 100 has lagged international peers over the last three years
- Regulation: Consumer Duty has dominated the agenda, but attention now turns to AGBR
- Table Figure 13: The number of adults with a high risk tolerance and significant cash holdings is increasing
- New regulations should boost confidence in ESG investing
- Growth in the over-65 population and intergenerational wealth transfer are key opportunities for financial advisors
- Table Figure 14: The over-65 population is projected to increase year on year through 2038
- Table Figure 15: The majority of pension pots are withdrawn without advice or guidance
- Generative AI introduces a new way of working
- Table Figure 16: AI job postings in the UK financial services industry have risen notably since 2020
- A lackluster economy, high inflation, and weak financial markets make for a challenging backdrop
- Appendix
- Abbreviations, acronyms, and initialisms
- Definitions
- Methodology
- Secondary sources
- Further reading
- About GlobalData
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