Advisers have proven to be resilient in a challenging year, with 26% of adviser firms having an average annual turnover of more than £1m – a significant increase from 16% of firms in May 2015. Similarly, the proportion of firms that have a turnover of less than £250k has fallen to 38%, down from 56% last May.
- Nearly three in four advisers say the pension reforms have had a positive impact on the industry
- More than two thirds say the pension reforms remain the biggest opportunity in the market
- But one in five haven’t reviewed their due diligence following the reforms
- Auto-enrolment and the growth of the retirement market continue to be big opportunities
This has created an opportunity for the market to grow, with 40% of firms saying they are planning to recruit more advisers in 2016, up from 32% in May.
These figures, which come from Aviva’s latest Adviser Barometer survey*, show the strength of the financial adviser market in a regulatory landscape which constantly evolved in 2015, with more changes to come in 2016.
Pension Reforms
The results of the Barometer suggest that advisers have thoroughly embraced the opportunity presented by the pension reforms. 72% say that the pension reforms have had a positive impact on their business, and only 6% say it has had a negative impact.
But advisers believe there is more opportunity to come. 67% of advisers said that the pension freedoms are their biggest opportunity in the next 12 months. This is a slight increase from 63% in May 2015, when the reforms had just come into effect.
Many advisers have changed how they do business in response to the freedoms. 44% say they have changed the tools that they use because of the reforms, and a further 14% plan to. But one in five advisers haven’t reviewed, or don’t plan to review, their due diligence in light of the reforms.
While the reforms have provided opportunities, they have also created new challenges for advisers. Two in five say there are scenarios they are reluctant to advise on. This includes defined benefit transfers and taking the whole pension fund as cash, particularly if it is a “younger” client or a “substantial amount”. Other advisers said they would turn away insistent clients, and new clients who want to take their pension as cash.
Tim Orton, CEO Aviva Adviser Platform , says “It’s been nine months since the pension freedoms came into force, which has gone extremely quickly for providers and advisers, who have implemented proposition and process changes in a short space of time. It’s notable that a number of firms haven’t reviewed their due diligence since pension freedoms were introduced and I would advocate this as the changes to potential customer groups and requirements have been significant.
“The freedoms created a massive opportunity, as consumers became truly engaged with their retirement options, but many recognise they don’t understand retirement products. The renewed need for financial advice is great for our market, but now we need to look at how we can make sure that financial advice is available to more people, and prevent the advice gap from widening”.
Functionality comes first on platforms
The majority of advisers are happy with the platforms they’re using, with just over 1 in 10 considering changing their main platform in the next 12 months. When asked the reasons for changing, 72% of advisers said functionality, followed by value for money at 53%. More advisers are also looking for a greater choice of products from platform providers (35%, up from 25% in May) and concerns about profitability have increased (30%, up from 24%).
Just over two thirds of advisers are using fund ratings providers. Nearly 2 in 5 (38%) use guided fund ranges. And nearly three quarters (72%) would use a portfolio that contains a mix of passive and active funds for mid-market clients.
“Understandably advisers want to get the most out of their platforms. We offer training and support for many adviser firms, and have an accreditation programme to help advisers use our platform in the most efficient way” says Tim Orton.
“Given recent unsuccessful platform sales it’s unsurprising that concerns about profitability are starting to appear in the market, which is a great opportunity for companies like Aviva with a growth ambition backed by a strong UK based parent company”.
More challenges and opportunities to come
A third of advisers consider auto-enrolment to be one of the biggest opportunities for them in the next 12 months, up from a fifth last May. 22% say that workplace savings is also a big opportunity, up from 10%.
For those who currently operate in the auto-enrolment market, just over half (54%) have seen increased demand from small businesses looking for advice in line with staging dates. This is down from 79% in May 2015.
The Sunset Clause provides another opportunity and challenge for advisers. One in four (24%) see attracting orphaned customers as one of the greatest opportunities in the next twelve months, up from 15% in May 2015.
“2016 is going to be another exciting year for advisers and providers, and just like with Pensions freedoms, those who see the changes as an opportunity rather than a threat will be the most successful.
“One of the big areas of change could be driven by the Financial Advice Market Review. It's crucial that the market, both providers and advisers, can get suitable information and advice to all customers with a need. As an industry we need to support advisers to operate profitably as part of providing choice to customers. Our findings show Professional Indemnity costs are a constant worry. It would be wrong if this limits advice provision and customers go unserved.
“Consumer protection is critical, but we'd like it to be balanced to ensure advice is available to more people. Financial redress should be available but structured in such a way that providers and advisers are encouraged to support more customers. We need to protect consumers and in part this involves limiting the poor customer outcomes that could ensue if people make complex financial decisions alone.
“Of the options presented in the Financial Advice Market Review, we would support further exploration of the pooled compensation fund, which could be funded by providers of advice. By limiting the liabilities and self-funding rather than insuring the fund this could reduce the costs to advisers and in turn help ensure more consumers are served with advice at a price that is affordable to them”.
Ends
If you are a journalist and would like further information, please contact:
Aviva Press Office: Lauren Peel: 01904 452472 or 07800 693 475 or lauren.peel@aviva.com
Notes to editors:
*Research conducted between 4th and 16th November 2015 with a sample of 1865 advisers and paraplanners. See attached pack for more details.
- Aviva provides life insurance, general insurance, health insurance and asset management to 34* million customers, across 16 markets worldwide
- In the UK we are the leading insurer serving one in every four households and have strong businesses in selected markets in Europe, Asia and Canada. Our shares are listed on the London Stock Exchange and we are a member of the FTSE100 index.
- Aviva’s asset management business, Aviva Investors, provides asset management services to both Aviva and external clients, and currently manages over £245 billion in assets.
- Aviva helps people save for the future and manage the risks of everyday life; we paid out £24.6 billion in benefits and claims in 2014.
- By serving our customers well, we are building a business which is strong and sustainable, which our people are proud to work for, and which makes a positive contribution to society.
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* Before the deduction of overlapping customers.