New advisers to bear the brunt of Covid-19’s bite

“People are not thinking about investing right now. I haven’t seen any new financial advice clients since before the crisis started. If I didn’t have wills and protection, I would be pretty bad right now.”

Reliance on fees

Financial Conduct Authority data for 2018 – the latest available – showed that for companies advising on retail investments, 80 per cent of revenue came from fees and charges. An extra 17 per cent came from commission, while just 3 per cent came from other sources.

The FCA data also showed that on average, 65 per cent of this fee revenue came from ongoing fees, while 35 per cent came from initial business or one-off fees.

Philip Milton, chartered wealth manager at Philip J Milton & Company, said shrinking transaction numbers for new advisers could be bad news for the advice market.

He said: “In terms of new advisers entering the market, it poses a threat to the provision of financial advisory work.”

The crisis is set against a backdrop of falling IFA numbers. A recent freedom of information request from Financial Adviser showed that IFA numbers fell for the first time since the Retail Distribution Review last year, while restricted numbers have continued to rise.

Keith Richards, chief executive of the Personal Finance Society, agreed there was a threat, but was optimistic about the future of the advice market.

He said: “While there is a risk that some advisers, or indeed trainees, may exit the market in the hardest-hit firms, it is likely that many will return once demand and financial stability returns.

“In the long run, this crisis underlines the need for financial resilience and planning more broadly, and therefore both the need and demand for professional financial advice is set to grow.”

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