The adviser shortage is here to stay: What should firms do?

As the Head of Strategic Partnerships & Platforms at Investec Wealth & Investment (UK), it’s crucial that I understand the issues facing financial advisers today. There are several that stand out to me – and that I’ll cover in upcoming articles – such as the increasing difficulty of client retention, the problems small firms face in competing with large brands, and how to hold onto business after a wealth transfer.

Something I’m pleased to say is not a present concern is demand. The number of people who could benefit from financial advice – primarily those with assets of between £50,000 and £3 million – has been growing in recent years and is expected to grow further.

However, unless firms act soon to address the current adviser shortage, they will be unable to benefit from this growing market. That’s not only bad for firms, but for clients too.
 

Clients are already finding it difficult to get advice

We surveyed over 500 UK adults who currently hold stock market-related investments to find out how the adviser shortage is affecting them. We discovered that one in five consumers (19%) have struggled to find an IFA, financial planner, or wealth manager in the past 10 years.

The reasons varied. Some consumers found that their portfolio wasn’t large enough for an adviser to take on, or they told us that the advisers they spoke to didn’t seem very good.

Unsurprisingly, many respondents told us that the IFAs and wealth managers they spoke to were either planning to leave the industry (24%), or that they were too busy to take on new clients (24%). These issues are two sides of the same coin: as some advisers get ready to retire or change jobs, those who are left lack the capacity to take on the surplus of business.

To understand the full context of the shortage, we also surveyed a panel of financial advisers and financial planners. Around two in five (42%) told us that they believe the current shortage of IFAs and wealth managers is set to increase, with around 5% believing it will increase dramatically in the next five years.

The reasons are clear. Three in four (74%) of those who see the situation worsening agree that the industry is struggling to attract enough younger talent, while more than half (55%) feel that more IFAs and wealth managers are due to retire. Simply put, the inflow of newly qualified advisers can’t keep up with the outflow.

It’s concerning that the current shortage of IFAs and wealth managers in the sector could continue, particularly when the impact of this is already being seen through future potential clients being lost simply because advisers can’t take on new business.

The inflow of newly qualifed advisers can't keep up with the outflow.

An ageing client base compounds the problem

There’s another dimension to the issue if we compare the demographics of prospective clients versus existing ones.

Consumers who are just entering the wealth window where advice becomes critical tend to be at the younger end of the age spectrum. While they may have relatively simple needs, these are often the individuals who are turned away by firms due to a lack of resources.

Meanwhile, the existing client base of the firm tends to be ageing and that comes with increasingly complex needs. As more and more clients move into drawdown, the burden of work on the IFAs left will only increase.
 

Firms must address the situation from several angles

Clearly, more must be done to make this an attractive career for new talent. However, that solution could take years to make an impact, while an increase in capacity is needed today.

Right now, firms need to ensure they have the right tools, technology, and services to enable their IFAs and financial planners to focus on the aspects of the profession that really matter – delivering value to their current clients and the ability to take on new ones.

I’d argue that the best way to do both is through a single, centralised investment proposition, looked after by a key partner. Working with a DFM can alleviate some of the administrative burden and significantly help to deliver the much-needed capacity to concentrate on the financial planning needs of clients.
 

Many trust Investec Wealth & Investment (UK) for this support

For over 25 years, Investec Wealth & Investment (UK) has worked with advisers and built thousands of trusted relationships. I’m proud to say we’ve earned a reputation for outstanding service.

From off-the-shelf products to award-winning bespoke investment portfolios, we offer solutions that will help firms to win new clients and build stronger relationships with existing ones.

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