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Advisers putting brakes on new client acquisition

  • By Georgie Davey
  • News
financial advisers

Faced with economic and political uncertainty, many financial advisers have focused their energies on client retention instead of new client acquisition in the last 12 months.

This is one of the main findings from global research firm Investment Trends which has released its latest 2019 UK Adviser Technology and Business Report. This is in-depth study of financial advisers in the UK examines their evolving technology needs and how they run their advice practice.

The report, now in its tenth year, is based on a survey of 1,216 financial advisers concluded in March 2019.

The average adviser only added 15 new client relationships in the last year, down from 19 new clients in each of the preceding two years. Despite this fall, significantly fewer advisers cite new client acquisition among the main challenges they are dealing with in their businesses (14%, down from 26% in 2018).

“Advisers have shifted their priorities in response to the current market climate,” said Recep Peker, Research Director at Investment Trends. “New client acquisition is largely on hold given the uncertainty, and instead many advisers are focusing their efforts on client retention and reducing the cost of providing advice.”

“Advisers face challenges on multiple fronts and will require more support from their service and technology partners than ever,” added Peker.

Regulatory change/uncertainty (58%) and compliance burden (57%) continue to dominate adviser’s list of concerns, while market performance (27%) and Brexit (26%) are also key issues. Further, significantly more are dealing with what they describe as poor provider service levels (39%, up from 35%) and replatforming issues (28%, up from 20%).

Replatforming issues led to a surge in platform switching, with two in five advisers saying they stopped using a platform for new business in the last 12 months (39%, up from 32% in 2018 and 22% in 2017).

The top beneficiaries of switching have been Aviva Wrap, Transact, FundsNetwork and Standard Life Wrap, with each growing their share of primary relationships (the platform that advisers use the most for new flows).

The off-platform market is heavily concentrated around Royal London and Prudential

A quarter of new client monies advised by financial advisers are placed through off-platform wealth providers. However, unlike the platform market this space is heavily concentrated – the top two players, Royal London and Prudential, hold 74% of all primary relationships. This is equivalent to the combined share of primary relationships held by the top nine investment platforms.

Canada Life, Scottish Widows and LV= each also have extensive reach, but only a small share of primary relationships.

“Advisers do not rely exclusively on platforms to meet the diverse needs of their clients,” said Peker. “Compared to platforms, off-platform solutions are favoured for their brand recognition among end-clients, their ongoing adviser support and their comprehensive suite of retirement solutions.”

Advice software satisfaction is strongly influenced by the client-facing online portal

Client engagement remains a key priority for advisers and virtually all (96%) believe their clients should have access to an online portal. However, advisers want the online portal to play a greater role in strengthening their client relationships – not just as a way for clients to view their accounts and transactions.

”In an ideal world, advisers see the online portal as a two-way communication channel, helping them keep closer track of their clients’ situation while also using it to educate and keep clients informed,” said Peker.

“Advisers’ belief in the benefits of a client-facing portal is reflected in their satisfaction with advice software applications.

For instance, users of CashCalc, Voyant and Prestwood are more likely to give their clients direct access to these solutions or use them during face-to-face client meetings. These three providers lead in software satisfaction ratings, highlighting the importance for software providers to adopt an end- client focused approach to usability and functionality,” said Peker.

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