Three quarters of advisers have seen gross revenues fall due to Covid-19, with a fifth forecasting a decline of at least 20 per cent, research has shown.
Research from the Personal Finance Society and NextWealth, published yesterday (October 1), found smaller firms, with only two to five employees, had been hit the hardest, with 83 per cent reporting a drop in revenue.
It also found that directly authorised firms were worse affected than appointed representatives, with nearly four in five (78 per cent) reporting a negative impact on gross revenue compared with 65 per cent of ARs.
Meanwhile only 5 per cent of the 365 PFS members surveyed between July 31 and August 12 said that Covid-19 had had no impact on revenues.
Data from the Financial Conduct Authority, published earlier this year (July), showed the average profit retained by advice firms had already declined before Covid, with every size of adviser business seeing drops between 2018 and 2019.
The data showed on average, one-man bands saw their profit drop from £32,000 to £28,000.
Firms with two to five advisers made a retainable profit of £54,000 in 2019, down from £74,000 the year before, while the average profit kept by firms with six to 50 advisers had plummeted from nearly £200,000 in 2018 to just over £150,000 last year.
However, despite revenues suffering, advisers found that client numbers have improved during Covid.
Nearly half (45 per cent) said they are working with more clients, while only 5 per cent have seen client numbers drop, compared with the same time last year.
Heather Hopkins, managing director of NextWealth, said: “Financial planners adapted quickly to remote working but the inability to meet prospects face to face has taken its toll on financial advice businesses.
“All indicators point to a rapid recovery with new client enquiries picking up again. While technology enables the advice process, our analysis reveals that financial planning relationships still rely heavily on an initial trust-building face to face meeting.”
But the PFS and NextWealth warned advisers could face trouble in the future after they found fewer than a third of firms had analysed their workflows to look for bottlenecks or areas that could be made more efficient and created an actionable plan for improvement.
Although lockdown forced firms to embrace technology and change their processes, nearly half (47 per cent) do not currently use e-signatures.
Advisers said the lack of time to learn and implement new technology was the biggest barrier to changing tech provider, while others said they would only introduce new technology if it integrated with their current systems.
Despite this, there has been a greater uptake in IT systems and tools, such as document sharing, online bookings, digital signatures and project management tools, overall.
It is also likely that advisers will continue to have virtual meetings with their clients.
Keith Richards, chief executive of PFS, said: “When lockdown was announced many firms quickly embraced technology to ensure they could continue to service and reassure clients against a backdrop of extreme market volatility.