The advice sector remains in rude health, with financial advisers buoyant about future business prospects and looking to expand despite the economic uncertainty caused by Brexit, according to a new report.
The Aegon Adviser Attitudes report finds that four out of five advisers have seen turnover increase in the past year, with the same percentage expecting to see this trend continue into 2018.
This growth is expected to come from an increased number of people seeking advice about their pension options, particularly in relation to defined benefit pension transfers.
The report found that three quarters of advisers said they expected an increase in clients in the coming year. One in five advisers said they expected this future growth to be “significant”.
Just 5 per cent of 250 advisers surveyed say they expected customer numbers to fall.
Such is the anticipated demand for advisory services, that around a quarter of advisers surveyed say they are looking to expand their business in the near future and take on additional staff.
The report is the first in a series from Aegon, which aims to take the financial pulse of the advisory sector.
It shows that advisers are reaping the benefits of the pension freedom rules, which has given people more flexibility on how they take their pension savings.
It will come as little surprise that more than one in two advisers (53 per cent) say the biggest opportunity for the advice industry over the next two years was the increased number of people seeking advice about DB transfers.
Concerns about the adequacy of DB scheme funding, rocketing transfer vales and the benefits of defined contribution pension freedoms have come together to create a surge in demand for advice in this complex area.
However, the Aegon report points out that demand for advice on DB transfers is currently outstripping supply. It says that with regulatory guidance on this area being updated it is “not at all surprising” that when asked to identify the biggest opportunities for the advice industry in the next few years, DB to DC transfers came out top.
But this wasn’t the only area of potential growth highlighted by advisers. Around one in four (26 per cent) of advisers say the introduction of the new pensions dashboard would help them grow their business – with improved access to information about historic savings plans prompting demand for broader pension planning and advice.
The report also found that advisers saw social care as a potential growth opportunity for their business.
While the report shows the profession remains confident about its future prospects, it also highlighted what advisers thought were the main risks to their business.
Although 21 per cent of advisers said Brexit provided a opportunity for their business, a larger proportion (40 per cent) say they are worried that Brexit could damage future growth.
More advisers are concerned about broader political volatility and economic uncertainty – of which Brexit forms a part. Around 70 per cent of advisers surveyed said they were worried this could hamper future growth in their business.
Advisers were also concerned about regulatory change, with 23 per cent of advisers, almost one in four, saying the introduction of MIFID II was a potential threat to their business.
The emergence of “robo advice” is also a topic that divides the advisers, with 31 per cent expecting that these automated tools will help them grow their business. A similar number identified robo-advisers as a potential threat, although this number falls back sharply among advisers with higher net worth clients.
Aegon UK pensions director Steven Cameron says: “These findings reveal advisers are in a confident mood, and against a backdrop of change it’s clear that out of challenge comes opportunity.
“From RDR to pensions freedoms the UK’s finance advice market has been buffered by its fair share of regulatory headwinds in the past decade, but has emerged stronger, and more sustainable.”
He added: “The government’s pension freedoms have given more financial responsibility to individuals approaching retirement, making the role of the adviser a fundamental backbone of our pension system.”