EICB 5 - Are advisers under more pressure than ever?

Advisers are being pressured by inflationary business costs and heavier regulatory burdens
Many advisers have responded by raising charges and minimum portfolio sizes for clients
Post the pandemic, some advisers are also reporting notable impacts on their mental health

Advisers are responding to industry pressures

Our latest Barometer reveals financial advisers are being pressured by a range of industry headwinds, including the impact of regulatory compliance, increased workloads and higher business costs.

The challenge of higher workloads shows up in relation to government policy on savings and Consumer Duty. If the government’s surprise removal of the pension lifetime allowance is welcome among advice firms, the admin workload that such changes have created over recent months is not. A 60% majority of advisers believe that ad hoc changes to tax policy are having a larger effect than before on their business processes. Add to this the fact that a 63% majority of advisers admit that their firm will need to outsource to meet Consumer Duty requirements and a picture emerges of regulatory-driven workloads driving up advice firm costs.

Mixed news on the advice gap

The majority of advisers (57%) agree that the Consumer Duty will prompt them to move lower-value clients out of legacy products into new, lower-cost products. While this is the outcome the FCA wanted to see, there may be an unintended consequence. Perhaps because of the extra work involved, 66% of advisers say they have increased, or will increase, their charges for lower-value portfolios. Indeed, 84% of advisers told us they have also increased their minimum portfolio size. Given these developments, it is no surprise to see that most advisers still believe the Consumer Duty could exacerbate the advice gap.

However, there is some good news for the FCA. The majority of advisers (62%) believe that their proposal for a low-cost simplified advice regime will have no impact on their business since it targets different consumers with smaller (£10-40K) cash balances sitting in bank accounts. This belief is underlined by the fact that the average minimum portfolio size among our adviser sample is a chunky £91K. Encouragingly, a 60% majority of advisers believe that FCA intervention in this part of the market could be successful in reducing the advice gap.

Adviser mental health

In the post pandemic era, the level of awareness around mental health has never been greater. Since COVID, businesses have had to deal with lockdowns, new ways of working, inflation, higher interest rates and borrowing costs, and supply disruptions due to the war in Ukraine. Recent research from Mental Health UK shows that 80% of small- and medium-sized enterprise owners have experienced some symptoms of poor mental health at least a few times a year*. Our survey reveals the advice industry is also feeling an impact, with a sizeable proportion of advisers reporting that they have experienced indications of mental health pressures.

* Source: mentalhealth-uk.org

“Mental health is something I feel strongly about. People’s awareness of it and their willingness to discuss it has grown immeasurably in recent years. Our parent company, Lloyds Banking Group and Mental Health UK formed a partnership to help SMEs with their mental health and resilience, which offers free therapeutic coaching to business owners. It allows us to support our business partners directly and is just one small part of Lloyds’ mission to ‘Help Britain Prosper.’

We know from our engagement with advice firms that they are working through the impact of heavy compliance burdens, higher workloads, and higher costs, but our survey really helps put these pressures in perspective. Providers and platforms can support advisers by lightening their workload. We are determined to be the easiest, most highly connected platform on which to do business and are investing heavily in our platform development roadmap to achieve that goal.”

Ranila Ravi-Burslem
Intermediary Distribution Director, Embark Group