While a strategic business model may offer more protection than a short-term, sales-driven approach, some advisers will be hurt by the pandemic simply due to the nature of the advice they provide, says Scott Gallacher, director and financial planner at Rowley Turton: “Mortgage and protection advisers will be hit hard, because most of their work is new business.
"And the mortgage and protection market is being hit by the ‘closed-door’ nature of the pandemic – people are just not moving house.”
Other factors will be important too, in assessing the impact of the pandemic on profitability, as Mr. Gallacher adds: “For those advice firms which are client-service driven, coronavirus is not such an issue.
“But it will be a testing time for firms that are not long established, have spent the money coming in or have invested in an aggressive growth strategy. Also, some newer advisers who have never seen a crash before.”
He concludes: “If the pandemic turns out to be a blip, people will trade their way out. If it is the new norm for a few years, it will be a different picture.”
Swings and roundabouts
Despite the negative impact of the pandemic on profitability, there are also potential sources of new business, as Mr. Anderson explains: “We had a particularly good month in March, but expect the next few months will be down, as people have other things on their minds.
“However, there may be an increase in enquiries from people looking for retirement-planning advice – for instance if their work circumstances have changed.”
Mr. Churchouse also anticipates that expert financial advice will be particularly in demand as a result of the pandemic, as he says: “People are unsettled and will be looking to make changes. I expect a baby and divorce boom, as people are trapped together and some people manage that well, whereas others don’t.”
Advisers are noticing other potential new revenue streams emerging, too, from people who might previously have overlooked the value of expert advice: “We are receiving lots of calls from DIY investors who realise that things could have gone better, Ms. Boyle reports.
“And people who have been managing their own pensions may be realising that they have been taking more risks than necessary and now need professional advice,” she adds.