In Focus: Profitable advice business  

Advisers eye 10% growth in shift to financial planning

Advisers eye 10% growth in shift to financial planning

Financial advisers expect their businesses to grow despite choppy markets, as the majority aim to shift their focus from portfolio management to financial planning to strengthen long-term relationships with clients.

Natixis Investment Managers' Big Reset report found advisers predicted a median growth rate of 5 per cent for 2022, and 10 per cent over the next three years.

But, aware they will most likely not be able to rely on market performance for growth, as has been the case over much of the
past decade, advisers said they would look to win new assets from new clients instead.

Natixis had polled 750 advisers based in Europe and 300 in the UK, as well as 1,650 globally and found the annual median number of clients they wanted to add to their books by 2024 was 25 in Europe and a more modest 16 in the UK.

Advisers generally thought adding new clients was the most challenging way to grow and so 50 per cent of UK advisers said they would turn to demonstrating to clients how they add value beyond asset allocation.

"This ties in directly to a major transition under way in the wealth management business. Many financial professionals have found that shifting the focus of their business from portfolio management to financial planning can strengthen long-term relationships," the authors stated.

"This transition could be vital in the year ahead as clients see higher volatility, lower returns, and potential short-term losses.

"Rather than letting client relationships be defined by the transaction of selling into or out of an investment, a broader focus on financial planning could help them keep clients focused on the long-term goals."

Volatile markets

Geopolitics, inflation and volatility were the top market risks for European and UK-based advisers, with 72 per cent of UK advisers citing this as a concern, compared with a global average of 57 per cent.

The war in Ukraine has had a significant impact on inflation, at a time when the global economy was in post-pandemic recovery and energy demand was high. As a result 68 per cent of UK advisers see it as a top portfolio risk.

 

The market volatility experienced in the first half of the year represented a further concern for 48 per cent of UK advisers.

However, few thought the market slide would persist throughout the year, with UK advisers anticipating 2.2 per cent growth for the S&P 500 and 4.7 per cent gains for the FTSE 100 by year-end. 

Darren Pilbeam, head of UK sales at Natixis, said: “Geopolitical turmoil and market volatility have resulted in a perfect storm hitting stock markets and investment portfolios.

"To grow their businesses, financial professionals will have to adapt. In the short-term they’ll need to reset investment strategies for turbulent markets and emotional clients.

"In the long-term they’ll need to re-evaluate their market assumptions and determine how much the world has really changed if they are to hit their growth expectations."