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UK IFAs and their Clients; Identifying the IFA client base and how it can be grown.

Published By :

Verdict Financial

Published Date : Mar 2016

Category :

Banking

No. of Pages : 33 Pages

Following the implementation of the Retail Distribution Review, the UK market saw a decrease in the number of advisors as well as an increase in the cost of advice, creating an advice gap in the retail and low mass affluent segments. However, different types of service models have since emerged to fill the need for advice. Looking forward, the UK advice market will see an increase in demand as the population grows older and wealthier. In addition, the introduction of pension freedoms in April 2015 has prompted a rising number of UK customers to seek out professional advice.

Key Findings

  • Looking forward, growing affluence and an aging population will increase the amount of those seeking advice and bring more potential customers to the IFA target pool.
  • Older clients, particularly those approaching and in retirement, form the current core group of advisor customers. The typical UK IFA client is an older male investor, reflecting the fact that older men tend to be the most affluent demographic group.
  • Consumers who choose professional advice do so in order to receive strategic advice and access to the better range of investments available through professional advisors.

Table of Contents

EXECUTIVE SUMMARY

Key findings
Critical success factors

THE INVESTMENT ADVICE MARKET IN CONTEXT
The Retail Distribution Review created a gap in the advice market
Simplified advice services address the advice gap
Consumers now have more control over their retirement finances
Many have chosen to access their pensions without professional advice
Not all pension ""freedomers"" share the same level of financial literacy
Shifting demographics and increasing affluence will grow the potential market
An aging population brings more consumers into the IFA market

THE IFA CLIENT BASE IN FOCUS
Understanding client preferences
Half of UK investors arrange investments directly with providers
Older clients form the core of the IFA market
The advised client base is skewed towards men
Mass affluent investors are a key target demographic
Widowed investors are most likely to rely on advice
Understanding the drivers for seeking financial advice
Clients go to advisors for investment strategy and range of investments
Retirement considerations and life events prompt clients to seek professional financial advice
Securing retirement income motivates investors

HOW TO GROW THE ADVISOR CLIENT BASE
Self-directed investors offer a good client acquisition opportunity
Client prospecting is still very much a traditional affair
Clients are largely sourced through non-digital channels
Most clients are sourced by referrals, meaning that advisors should continue to impress the existing client base
While most advisors now offer digital access, mobile capabilities are lagging
Robo-advisors are an increasingly popular channel
Social media can be an efficient client communication and prospecting tool

APPENDIX
Abbreviations and acronyms
Definitions
IFA/financial advisor
A firm or individual whose primary line of business is providing financial planning and investment advice to customers.
Emerging affluent
Mass affluent
Retail market
Methodology
Verdict Financial's 2015 Independent Financial Advisor Survey
Verdict Financial's 2015 Retail Banking Insight Survey
Bibliography
Further reading
About Verdict Financial
Disclaimer

List of Table

NA

List of Chart

Figure 1: Advisors were most commonly used by consumers opting for drawdown in Q3 2015
Figure 2: The UK affluent population is growing steadily
Figure 3: Growth in the 65+ age segment means more customers in the prime advice-seeking demographic
Figure 4 The majority of UK investors prefer to arrange their investments directly with a provider
Figure 5: There is a large pool of unadvised investments among the older generations
Figure 6: Saga Investment Services offers advice for clients at different stages of retirement preparation
Figure 7: Saunderson House caters to the needs of busy professionals 
Figure 8: The advised client base is skewed towards men, but only because a far larger share of them are investors
Figure 9: Mass affluent investors have the largest share of unadvised investments
Figure 10: Widowed clients have the largest share of advised relationships
Figure 11: The need for an investment strategy draws clients to advisors
Figure 12: Specialist knowledge is the main consideration for consumers in choosing an advisor
Figure 13: Retirement is the leading driver for UK clients to seek professional advice
Figure 14: Long-term investments are directed towards retirement goals
Figure 15: PensionBee combines clients' pensions pots under a single view
Figure 16: Wealth Wizards offers online retirement and pensions advice
Figure 17: Preference to manage simple investments themselves and the cost of advice drive consumers to self-direct
Figure 18: Client referrals are the leading source of new clients
Figure 19: Telephone calls remain the most common form of client communication
Figure 20:  Nutmeg has a straightforward sign-up process

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