The number of advice firms looking to sell or exit the space continues to ramp up, as soft markets “dampen optimism”.
Over the past three years, the share of firms looking to sell has increased from 4% in 2021 to 14% in 2023, NextWealth’s latest financial advice business benchmarks survey has revealed.
Meanwhile, those saying they will exit the market is at 8% in 2023, up from 1% in 2021 and 2% in 2022.
The research consultancy found small firms are more likely to be looking to sell or exit.
It suggested “tepid markets” may be “dampening optimism”. Only 45% of firms expect to grow by increasing client assets under management compared with 69% two years ago.
The report also found hiring plans are being shelved and plans to take on new clients remain steady year-on-year.
Only one-third of firms plan to recruit staff in the next 12 months, compared with 59% two years ago.
NextWealth’s research suggested that revenues are steady. However, there is a slowdown in new client numbers and costs are mounting due to inflationary pressures and Consumer Duty implementation – particularly in large firms.
These forces combined are curbing advice firms’ appetite to hire staff.
NextWealth managing director Heather Hopkins told Money Marketing that although advice businesses are healthy in terms of the number of clients they have, and they are retaining staff, it is the “outlook for growth” which is in decline.
“They’re not feeling so strained that they need to hire,” she said. “They’re not feeling like they’re turning away clients since there are fewer inbound queries coming.
“It’s a real challenge for the sector because we don’t have large numbers of new people coming in. If the firms that are operating in advice are planning to trim down their growth plans, this creates a question about how do we help the people that need the help?”
Meanwhile, consolidators continue to circle.
Around 48% of financial advice professionals said their firm has been approached about acquiring the firm.
Sole traders were most likely to have been approached though employees of these firms are also most likely to be aware of approaches as typically the adviser or planner is also a director of the firm.
There is much talk about the pace of consolidation slowing down in advice businesses.
But, to the end of September, the number of announced deals in 2023 exceeded those in 2022, suggesting consolidation continues apace.
NextWealth will update its consolidators and aggregators report in March 2024 with an update on volumes for 2023.
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