The extinction of independent advice by 2033

Iona Bain

The 31 page study outlined a perfect storm of factors that will shrink Britain’s pool of advice-seeking clients.

This could provide a huge wake-up call for a profession already grappling with seismic changes post-RDR. One adviser said it would no longer be possible to “stay in the Dark Ages” when it comes to technology. The good old-fashioned system of referrals through professional introducers, plus positive word-of-mouth among existing clients, may not be enough to stay profitable in the future, he argued.

He has a point. Looking at the future direction of fees, the report suggested that a typical income of £91,559 per adviser today will slide to £66,680 by 2033. Such a downward pressure on fees could spark a mass exodus of advisers from the industry. In order to maintain client numbers and the same level of fees for each adviser, around 5000 advisers would have to leave the market by 2035.

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We all suspect the factors that are causing this gear shift. An ageing population over the next two decades will play its part, as millions of babyboomers pass the retirement age and no longer the require the same hands-on financial advice.

This will coincide with a dramatic rise in the number of “extremely tech-savvy” investors, the report said. We know that most young adults today do not have the means to use an adviser, but that they could become clients in the future. Sadly, the report suggested that a third of people who would have turned to an adviser as they got older will be more comfortable researching and even managing their finances online.

The “Future of Product Distribution” report did offer some silver linings. High net worth investors, who are often an adviser’s bread and butter, will not be going away anytime soon. Advisers can also bank on “emerging” high net-worth investors, so long as their progress isn’t stalled by a prolonged economic malaise in the UK over the next two decades.

Many advisers today know their careers will be well behind them in 20 years time, so this debate could seem largely academic. But these changes are already in motion, and few would doubt that a potential clientbase of the future is falling away as we speak, thanks to DIY investing.

Can advisers combat this by creating virtual investment tools for their clients? If advisers held financial ‘surgeries’ for the public, could this help raise awareness of the profession? Anything that brings financial advice to a greater number of people, and makes them understand its long-term value, cannot be ruled out.