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The Retail Financial Advisors and Intermediaries Market Report 2020

  • ID: 5118932
  • Report
  • June 2020
  • Region: Global
  • 50 Pages
  • IRN Research
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A £4.9 Billion Market, Employing over 30,000 Advisors

In 2019, intermediaries and advisors offering advice on retail investments earned almost £5 billion in revenue. While volume sales of new investment products declined by 16% in 2019 compared with 2018, revenue from the provision of retail investment financial advice grew, because most advisors earn income from on-going charges rather than from one-off product sales. Moreover, advisors and intermediaries selling retail investment are of increasing importance to the retail investment product market (i.e. the market for investment products other than direct purchases of stocks and shares). The share of retail investment product sales via intermediaries and made with advice rose in 2019 compared with 2018.

Firms offering advice on retail investment products provided ad-hoc/initial/one-off advice on 1.3 million occasions in 2019 and they catered to just over 3 million on-going clients. These clients are serviced by almost 6,000 firms offering advice on retail investment products, with most of these (around 5,200) being specialist financial advisory firms. Firms advising on retail investments collectively employ around 30,000 advisory staff. While almost £5 billion was earned in 2019 from advice and intermediation on retail investment products, financial advisors earned a total income of £5.6 billion: financial advisors generate income from retail investments and also from advising/intermediation on mortgages and non-investment insurance products.

These findings come from the publisher's report, Retail Financial Advisors 2020. This market data report considers the retail financial advice and intermediary market, covering regulated and unregulated advice offered to consumers when buying financial products or organising their financial affairs. It also considers intermediary non-advised product sales. The report assesses the size and structure of the market, recent trends, the future and sets out the environmental framework in which advice and guidance are offered today.

COVID-19, along with the uncertainty surrounding the final Brexit trade deal make it impossible to make any meaningful forecasts for the savings and investment industry in the coming years. The longer and more severe is the recession caused by the COVID-19 virus, the more likely it is that:

  • Advisors will switch from on-going to flat rate/one-off charges for financial advice
  • Advisors will switch most of their meeting with clients from face-to-face to virtual
  • Consumers may be more willing to get professional advice (finances willing) to cope with uncertainty.
  • Advisor operations will become more efficient via the greater use of online technologies to interact and communicate with clients
  • Negative interest rates will appear, which could encourage more investing rather than saving, or could encourage more consumption rather than savings and/or investment.
Note: Product cover images may vary from those shown
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EXECUTIVE SUMMARY

  • A fragmented market
  • The role of financial advisors is skewed towards specific products.
  • A market shaped by legislative, psychological and economic development
  • A market generating over £4 billion from retail investment advice
  • A highly uncertain future
  • Introduction
  • Definition
  • Abbreviations

MARKET STRUCTURE

  • Almost 14,000 advice providers
  • Multiple income streams
  • Over 30,000 retail investment advisory staff
  • Most advisory and intermediary firms are small scale operations
  • However, many are part of networks or groups
  • Independent vs restricted advice
  • Fund platforms crucial for the execution-only, non-advised market
  • Publicly funded guidance

MARKET DEVELOPMENTS AND DRIVERS

  • COVID-19
  • Consumers need professional help when investing
  • Access to and the quality of retail financial advice re-shaped by legislation
  • Despite RDR and FAMR the advice gap persists
  • IFAs the main source of professional advice
  • FCA thinks Robo-advice could eventually plug the advice gap, but not yet
  • Advice and intermediations most important for bonds and long-term care
  • Senior Managers and Certification Regime
  • FCA seeks to reform the fund platform market

THE KEY PLAYERS

  • St James’s Place by far the largest network
  • Collectively the fund platforms are the largest players in the investment funds sector

MARKET SIZE AND TRENDS

  • £4.4 billion earned from retail investment advice
  • But retail advisory firms earn £5.6 billion in total
  • Intermediated volume sales fall but advised volume sales increase
  • Facilitated and on-going revenues the growth areas for retail investments
  • Over 3 million clients receive ongoing advice on retail investments

THE FUTURE

  • The Brexit unknown
  • Robo-advice, the long-term disruptor
  • Human advisors are likely to shift upmarket
  • If not Robo then certainly more automation
  • Associations

LIST OF FIGURES

Figure 1 The number of retail advisory firms, 2017-2019
Figure 2 Trends in advisory firm numbers 2010-2019
Figure 3 The breakdown of intermediary revenue* and retail investment revenue, 2018
Figure 4 The number of retail advisory firms receiving revenue from intermediary activities, 2013-2019
Figure 5 The number of retail investment and mortgage advisory staff
Figure 6 The size analysis of financial advisory firms and mortgage brokers, 2018
Figure 7 The size analysis of insurance brokers, 2018
Figure 8 Breakdown* of retail investment advisory firms by type of advice offered, 2018
Figure 9 The share of advisory charge income from independent advice, 2016-2018
Figure 10 The percentage of investment product volume sales which are intermediated and advised, 2019
Figure 11 The largest financial advisors by % of retail investment and pension sales 2019
Figure 12 The source of gross retail sales of investment funds (% of value), 2015-2019
Figure 13 Examples of fund platforms and Robo Advisors, 2020
Figure 14 The retail investment advice and intermediation market, 2013-19
Figure 15 Retail investment volume product sales by advisors and intermediaries
Figure 16 Total advisor charge revenue by method of advisor payment*, 2015-2019
Figure 17 The types of charges imposed by firms advising on retail investments*, 2018
Figure 18 The number of clients/advice services offered by firms advising on retail investments, 2016-19
Figure 21 How advice regulations could apply in the future

Note: Product cover images may vary from those shown
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