Asset growth no longer driving revenues for advisers
- Only 15% of advisers expect growth in asset values to drive business growth in next year
- Retirement planning expected to be single largest driver of revenue growth for majority of advisers
- Increasing demand for ‘just advice’ likely to move advisers away from contingent charging
Flat asset prices are causing advisers to look to other sources to grow their revenues, according to new research from Canada Life.
Only 15% of advisers foresee asset value increases propelling business growth in the next year, down from a third [34%] over the past five years.
The biggest single driver of growth is expected to be retirement planning, with six in ten advisers [58%] believing this area has the potential to increase revenues, followed by inheritance and wealth planning [51%] and pensions consolidation [45%].
However, to compensate for the shortfall, advisers are also placing increasing importance on other areas. There has been a significant uptick in advisers expecting business growth to come simply from the demand for advice, with over four in ten [44%] advisers seeing gains to be made in this area, up by seven percentage points in the past five years. Equity release is also increasingly expected to drive business growth [up six percentage points to 16%].
What is expected to drive business growth over the next year?
| Over the next year | |
| Retirement planning | 58% |
| Inheritance and wealth planning | 51% |
| Pension consolidation | 45% |
| Simply the demand for advice | 44% |
| Changing regulation driving more people to seek advice | 24% |
| Equity release | 16% |
| Growth in asset values inc. equity prices | 15% |
| Pension transfers, specifically DB business | 7% |
Neil Jones, Tax and Wealth Specialist at Canada Life, said:
“The increase in demand for advice has propelled this into the higher rank of business drivers. It’s now a central part of advisers’ income streams, making up a ‘big four’ advice areas with retirement planning, IHT planning, and pensions consolidation.
“Overall, there are notes for caution as well as encouraging signs. The principle engine for wealth creation over the past 30 years has been the increase in asset prices for things like equities and residential property. Ultimately, that falling is a concern, be it because of Brexit or fears of a trade war.
“What’s encouraging is the way advisers are reacting by looking at other revenue streams. The demand for advice is growing rapidly, which we believe will motivate more advisers away from contingent charging towards a system in which people are paying for the advice itself.”