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Small advice firms to thrive by 2028


In the next five years the financial advice sector will see small adviser firms thrive while the number of clients served will grow by 30%, according to predictions from wealth consultancy NextWealth.

Its Future of Financial Advice report published today predicts the shape of the market by 2028.

The report suggests that by 2028, small firms (up to 100 employees and up to £10m in revenue) will have hammered out a robust operating model and will have a partner for compliance support.

Most will adopt a single source tech stack and they will focus on a client niche or local community, the report says.

Despite the current high level of consolidation, small advice firms will continue spinning out of larger corporates as well as there being new registrations, the report said.

It reckons advice firms will establish propositions suitable for clients with smaller portfolio values and advised clients will not all receive the same service.

Heather Hopkins, managing director of NextWealth, said: “Firms will use segmentation models to define propositions, making clever use of tech and investment solutions to meet client needs.”

She said the concept of spending two or three hours at particular life moments face-to-face with a trusted adviser will not disappear, but where it suits client needs and preferences, “they will increasingly self-service and interact with other members of their client service team.”

The report predicts that firms will increasingly use a team-based approach to supporting clients, “backed by slick processes”, increasing capacity for firms that seek to work with a larger number of clients.

Other predictions include a gradual shift away from asset-based pricing towards new fee structures, AI will play a key role in compliance checking and firm size will be measured differently.

Ms Hopkins said: “Measuring firm size based on assets and number of advisers is outdated. While data on employee numbers and revenue is harder to get, we think they are more important.”

She added: “The future is created in incremental moments; small changes, new capabilities and the introduction here and there of different ways of thinking and operating. When we look around in 2028 it may feel that nothing has changed but when we look back, everything will have.”

• NextWealth conducted more than 30 in-depth dedicated interviews to explore its hypotheses for the report among a variety of business owners, industry consultants and the regulator. Interviews and interviewees were selected to be representative of each of NextWealth’s market segments, from small, independent firms to large nationals, consolidators and networks.

Financial Planning Today Snap Analysis: Despite the much predicted death of the small adviser or Financial Planning firm, they continue to thrive. NextWealth’s report backs up this view. While much of the attention recently has been focused on M&A and private equity investment in the Financial Planning / Wealth Management sectors, smaller firms have continued to grow and innovate. Their unique offering and very personalised approach is still valued by clients and profitable to deliver, as NextWealth suggests. The small adviser firm sector will continue to evolve and make good use of new and emerging technologies which will also spur growth. Things are changing though, the team-based approach is becoming more apparent enabling planners to service more clients with support from a strong team of fellow professionals. The high prices paid for Financial Planning firms also seem to be encouraging more new firms to launch to cash in on the growth potential and the potential to be acquired. The report suggests there is plenty of room for both big and small financial advice firms over the next few years. Consolidation has occurred but it seems to be driving more growth and innovation across the piste rather than destroying the small business model.




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