The Abrdn study also found 44 per cent of IFAs have or plan to make changes to their business to manage the impact of increased overhead costs.
Not all advisers will have great relationships with their clients. And, for those firms, raising fees may backfire as it prompts their clients to shop around.Scott Gallacher, Rowley Turton
More than a quarter (29 per cent) have or will relocate offices (43 per cent for networked businesses), while 28 per cent are investing in new platform technology (43 per cent for network businesses).
Scott Gallacher, director at Rowley Turton, says while relocating offices is likely to have little downside for clients, many firms will be tied into a lease, so this is not necessarily a quick fix for their current issues. As for investing in new platform technology, this might be to create efficiency savings.
He adds: “These efficiency savings could then reduce staffing costs or enable the firm to take on more clients. But again, this isn’t necessarily an easy fix, as changing any technology typically comes with a steep learning curve.
“As with any sector, not all advisers will have great relationships with their clients or provide a great service. And, for those firms, raising fees may backfire as it prompts their clients to shop around for a new adviser.”
At a conference held by ValidPath last year, Phillips says advisers were aware of the headwinds they faced and many already had plans in place.
Phillips adds that firms who are looking to sustain growth through new client acquisition or with longer time horizons are better prepared to address the challenges.
Matthew Connell, director of policy and public affairs at the PFS, says the big challenge around operational costs, regulation-wise, is the volatility around costs like the FSCS levy and professional indemnity insurance.
The FCA has set out a target as part of its retail investment strategy to "act to stabilise the FSCS Life Distribution & Investment Intermediation (LDII) and Investment Provision (IP) funding classes by 2025 and target a year-on-year reduction in these classes from 2025 to 2030".
Connell says: “The logic for this is that more effective supervision will reduce the amount of compensation that has to be paid by well-run firms.
In the same way we have a duty of care to our clients, the FCA should be understanding of our financial situation and how we are being impacted.Tim Morris, Russell & Co