In its most detailed survey of the market since the pandemic started, the Financial Conduct Authority last week revealed how advisers had been impacted by the coronavirus crisis.
For those in the retail investments category – made up of advisers, crowdfunders, wealth managers, self-invested personal pension operators, and more – they had the second highest proportion of respondents (66 per cent) compared with other financial services categories who expect a negative impact on their net income.
Of the 5,159 retail investments companies surveyed, 54 per cent expected a neutral impact on their business model, while 42 per cent expected a negative impact. Only 4 per cent had a positive outlook.
That said, only 1 per cent of companies in the retail investments category expected their income to be impacted by 76 per cent or more. Plus, there was an increase – albeit minimal at 1 per cent – in the number of profitable retail investment companies between February and May/June of last year.
So how well does the FCA results reflect how the advice industry has fared?
It has been an undeniably challenging year for the sector, but many advisers say IFAs have responded well. Some have fared better than others because of their pricing model.
Darren Cooke, a chartered financial planner at Red Circle Financial Planning, says: “Most advice firms I speak to have come through 2020 pretty well. If you are an established business where a large part of your income comes from servicing existing clients it should have had very little impact.
“For businesses that still rely on new business and initial fees I think they have been harder hit. While we have been able to service existing clients on a remote basis and using video calls, I think it has been harder to take new clients that way. It is not impossible but I think it is generally harder for many.”
Rebecca Aldridge, managing director at Balance Wealth Planning, agrees. She says: “I think we’ve managed very well on the whole. We are providing services that have been of huge value during the last year. Firms charging flat fees will have come out on top and would have been less anxious about the situation as it played out as well.
“Very few people will have walked away from their investment portfolios or their financial planners during that time, so the existing relationships have been quite stable. And there have been people needing advice triggered by redundancy, bereavement and retirement in particular.
“What is perhaps not reflected is the effort this has taken. For financial planners, providing ongoing advice to existing clients has taken significantly more time than normal, so I’d expect that to have had an impact on profitability.”
Where companies have been impacted negatively, Ms Aldridge attributes most of this to do with the practicalities of lockdown, restrictions and particularly home-schooling, rather than a slowdown in people seeking advice.