Advisers face 'twin pressures' from the coronavirus fallout which could shape the future of their industry, an investment consultancy has warned.
According to research conducted by NMG Consulting advisers are facing a "significant" threat to revenue, whilst dealing with the task of helping clients manage market volatility amid the pandemic.
In a survey of 209 UK advisers published by NMG this week, a fifth of respondents admitted the impact of market volatility caused by the outbreak had been much worse than expected.
The survey, which was conducted at the beginning of April with a 70:30 split between independent advisers and those within a network, found 53 per cent of advisers had been asked by their clients about withdrawals and 57 per cent had been approached about freezing or reducing contributions.
Mark Fox, principal consultant at NMG, said: "The financial advice industry is reeling. A sharp sell-off in asset markets has slashed client balances and forward volumes are under pressure.
"New business activity has frozen, contributions are down, and clients are enquiring about withdrawals."
Mr Fox said it was essential for advisers to communicate with clients, especially those tempted to make emotional decisions under stress.
But the NMG survey revealed potential flaws in communication strategies at advice firms, with 91 per cent of advisers relying on phone calls to maintain client contact and more than quarter confirming they would not consider video conferencing.
Mr Fox said: “An earlier investment in time and tech - allowing for one-to-many communications via video or social media where appropriate - may have created a better client experience and delivered advisers the time they need to have more focused conversations with clients in real difficulty."
He added: "For some financial advisers this combination of revenue pressures and changed client expectations will put pressure on their business models. For other advisers it presents clear opportunities for growth."
The unprecedented impact of the coronavirus and international lockdown has seen some advice firms now warning profits could take a hit next year as others reported a drop in workload.
But before the coronavirus pandemic took its toll on markets and global life, adviser data had pointed to a possible bright future of growing client numbers and resilient revenue.
In a survey conducted by fund data provider FE Fundinfo between November and December, 54 per cent of advisers claimed they were more positive regarding their business outlook at the end of last year than the previous 12 months.
This was driven by almost 80 per cent of advisers witnessing an increase in client numbers in 2019, with only 1.4 per cent reporting a drop in clientele.
The survey of 271 advisers, also found 52 per cent had seen an increased turnover of at least 5 per cent in 2019 and 30 per cent reported an increase of more than 10 per cent.
The survey showed increased industry optimism in 2019 despite advisers having to contend with rising costs and a growing regulatory burden throughout the year, with 85 per cent of respondents reporting an increase in operational costs over the previous 12 months.