The advice gap could widen as firms struggle to keep up with regulatory changes and economic pressures, according to a new report.
A research paper from consultants AKG, called Future of Advice – State of Flux, found advice firms are concerned about attracting new clients, partly due to marketing costs.
It comes as 38 per cent of firms said they were concerned about political uncertainty or geopolitical events, with 37 per cent concerned about regulatory or legislative changes.
The paper was sponsored by Canada Life and Charles Stanley and other key findings include 64 per cent of advisers predicting there will be “further momentum” in mergers and acquisitions over the next two to three years.
Tom Evans, managing director of Canada Life, said the industry is facing “change and challenges” which could have major implications on the advice market.
The paper also surveyed consumers, with a quarter saying they had seen a financial adviser in the past five years.
For those who regularly engage with an adviser, 19 per cent said it was important to have access to a person who "completely understands my financial situation".
While around 20 per cent of those who had not consulted an adviser in the past five years said they did not have enough assets or did not want to pay for it.
Evans said: “The paper delves into how the public regard their own levels of financial knowledge and their need for guidance.
“Some people feel confident now but worry about changing rules and regulations adding complexity in the future.
“Others wouldn’t see a financial adviser at all – even if professional advice was offered for free. Unpicking these wary perceptions of the advice industry is not a straightforward task, but is vital to understand, for adviser businesses not only to survive, but indeed thrive.”
Matt Ward, communications director at AKG, said while firms battle short-term issues it can be harder to make long-term predictions for the industry.
“Everyone is evidently busy dealing with important shorter-term issues which in turn is making a clear longer-term prognosis of the future of advice landscape harder to predict. Our previous FoA paper was dominated by Covid-19 factors and associated industry impact/responses. To some extent current fortunes are still being heavily impacted by external forces in the form of geopolitical factors,
Sean Osborne, head of sales at Charles Stanley, said the pressure is rising on all firms, but particularly on the smaller ones as the costs to attract a new, younger client base increase.
It comes in tandem with a general election on the horizon and the introduction of fresh regulation, including consumer duty.
He added: "Whilst, perhaps unexpectedly, more M&A activity is assumed in the years to come, it is concerning to see that these pressures may also lead to a further widening of the advice gap.
"To tackle uncertainty of costs and the added requirements of consumer duty, many firms are choosing to outsource their investments to a partner that can both provide access to an established investment team along with additional benefits that support client servicing and regulatory demands.”
