Oh no, not another survey…but can research help with my 2021 business plan?

We have all been inundated with research and surveys this year. Are they simply something to read to relieve the Zoom fatigue or can they assist financial advisers with their business planning for 2021?

I believe that the results from our recent Schroders Annual Financial Adviser Survey might offer a few areas to consider and implement:

1. Regulation

Regulation was the top most cited area of concern for financial advisers.

However it was noted that in response to the PROD regulations, the number of advisers segmenting their clients has risen year-on-year to 66%. The majority of financial advisers (65%) continue to segment based on client assets under management rather than by alternatives such as lifestage where clients potentially require a differentiated service proposition. Are we really saying that clients in later life require the same investment and service proposition as those in accumulation? I’m not convinced – perhaps time to review segmentation?

2. Sustainable investing

The percentage of advisers where the fund selection process specifically covers Environmental, Social and Governance (ESG) factors increased from 43% last year to a massive 74% this year. It was however concerning to note that against a backdrop of increasing client demand and regulation, probably requiring advisers to take account of sustainability preferences in suitability conversations, that only around 40% of advisers surveyed felt high levels of confidence when speaking with clients on this subject. An opportunity to upskill on sustainable investing?  

3. Adviser charging

43% of advisers surveyed told us that their advice fees were under pressure. It’s hard to walk along the high street without seeing a shop with a sale or offering discounts - we are living in a cut price world. Pressures for reduced fees also apply to platforms, asset managers and DFMs. For the first time since 2014, not one adviser reported charging more than 1% as an ongoing charge. The number charging between 0.75% and 1.00% had reduced from last year and those charging between 0.50% and 0.75% had correspondingly increased. There is definitely a pattern emerging of fee reduction so consider how this might impact your business in 2021. 

4. New clients

Finding new clients appeared as one of  the top three areas of concern. It’s probably no surprise that many advisers reported that during this challenging year, it has been easier to focus on servicing existing clients and 43% reported a reduced level of activity towards attracting new clients.

Given that a quarter of advisers reported the average age of their clients is over 65 (and 67% reporting an average client age of over 51), is this another reason to look at client segmentation by lifestage? As older clients pass on or move to drawdown thereby depleting the assets in the business, surely the next generation delivers a wealth of new clients? Whilst nearly 80% of advisers again this year told us that wealth transfer was a significant opportunity, only 20% have a strategy to secure next generations investors, currently lower value investors. Perhaps securing the next generation through wealth transfer should be included in plans for 2021?

5. Women investors

Continuing the wealth transfer theme, two-thirds of ‘baby boomer’ wealth is currently held within couples and the first point of wealth transfer is typically husband to wife. Worryingly, around 75% of women will move financial adviser at the point of inheriting, yet less than 10% of advisers had a differentiated strategy for attracting, retaining or advising women - particularly divorced or widowed. Is this potentially the biggest business opportunity for your business plan in 2021?  

In short, our Annual Adviser Survey has highlighted the opportunities and challenges facing advisers as we move into 2021. Perhaps the New Year is the time to review your business strategy in some key areas?

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About the author

Gillian Hepburn, UK Intermediary Solutions Director, Schroders

Gillian has over 30 years' experience in financial services. Prior to joining Schroders, she had an extensive career at Standard Life followed by consultancy positions with a range of platform providers, asset managers and financial advisers. She also founded DISCUS, a business which provided research, insight and educational content for financial advisers about the outsourced investment market and spent time as Head of Strategic Partnerships at the Embark Group. Gillian is responsible for outsourced investment solutions for the UK Intermediary market including model portfolios on platforms and multi-asset funds.

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