The IFA sector is set to shrink by around 7% over the next three years, widening the advice gap even further and putting the financial future of an increasing numbers of Brits at risk.
It will come as no surprise to learn that increasingly stringent regulation and pressure on costs are the main reasons cited for exiting the industry, research from UK advice firm Succession Wealth, which surveyed 45 wealth managers and IFAs, has found.
This comes at a difficult time for industry, as IFA network Openwork also released a study which found “there is a growing untapped demand for financial advice”.
Fewer advisers and rising demand can only equal people being left stranded without any access to advice.
This begs the question about whether advisers are being too quick to sell at a time when the demand for their services is only expected to rise.
Time to sell up
Succession’s research found that IFAs and wealth managers are increasingly looking to exit their businesses.
Half (51%) said that regulation was a “very important” trigger.
While 36% said the same about the growing pressure on costs and 34% cited the increasing investment needed to operate in such a heavily regulated environment as key reasons.
Clients want advice
But just as advisers are eyeing the exit, clients are turning to the sector.
International Adviser’s recent UK regional piece discussed how firms can fix the talent drought, but swift action will need to be taken if the current cohort of advisers is set to drop by 7% by 2022.
Openwork’s survey of 1,014 UK adults found nearly six out of 10 (56%) said they would benefit from regular financial advice.
Future demand also needs to be taken into account, with 71% of under-35s expressing interest in meeting with an IFA – clearly demonstrating that there is a steady stream of clients waiting in the wings.
The firm sees this as a “huge source of untapped demand for the advice industry”.
Currently, just 15% of adults see a financial adviser regularly, and around 23% of men said they see an adviser compared with just 10% of women.
Keeping up with the interest
Openwork believes the launch of pension freedoms, the growing numbers of people starting pensions and issues with affording homes are driving interest in advice.
Claire Limon, director of learning and acquisition at Openwork, said: “The financial services industry has seen increased demand, year-on-year, not just from older people looking for help through retirement, but also from young people who are looking to improve their financial literacy.
“More people across the UK recognise they need expert help to create and protect wealth for themselves and their families and want to have more control over their finances during uncertainty across the economy.”