Looking Forward to 2025 and Beyond

Welcome to the Executive Eye, where we share the latest insights into how the Financial Services profession is continuously evolving and adapting to the dynamic business landscape. We hope you enjoy it!

Read our latest edition below.

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As we end 2024 with Adviser productivity falling and salaries rising, it is an exciting time to predict what will happen over the next 12 months.

My Predictions

I think Consumer Duty will continue to bite as the regulator turns its focus from the largest players to the midsize and smaller players. This may expose other players who might have been less diligent in providing regular client reviews.? It will also continue to separate those who can sell their business from those who cannot (or at least have to delay the sale to make their business more saleable or to accept a lower sale value than they might have hoped for a couple of years ago). Older Advisers will continue to exit the market.

Adviser businesses, particularly the larger ones that have borrowed to fund their growth, will fight to become more productive by using AI and other technological solutions to support less affluent clients.

The post-COVID changing of political leadership across the World will also have an impact.? While it's too early to understand the implications of a Trump victory in America on the UK, the new Labour government in Britain has made an immediate impact with its tax and spending plans, aiming to tax the rich and redefining ‘working people’ to exclude business owners, pensioners and farmers.

Reduction in allowances together with rises to Employer National Insurance and Capital Gains Tax were introduced in the Autumn budget. Making pensions subject to Inheritance Tax has thrown the plans of many retired individuals and those approaching retirement into disarray.? This will mean many people will urgently need to rethink their investment strategy as they draw down their pensions to reinvest in other tax wrappers.

This seems great news for the Financial Planning profession, as it can help their clients totally rethink their financial plans. We already have a profession where demand for services exceeds supply, and this gap will become only more significant over the next 12 months as individuals who did not before consider themselves wealthy need to seek financial advice. Many who have previously chosen to self-manage their nest egg may now feel they need professional help.

Undoubtedly, the industry faces challenges, particularly in terms of growing the profession and addressing its current inability to do so effectively. However, these are positive challenges to tackle, especially during a period when much of the UK economy is expected to experience a reduction in demand.

If there is a boom around the corner, it may just mean there will be a race to hire experienced Financial Planners to cope with excess demand to onboard wealthy clients. That, of course, is great news for the headhunters and will drive up salaries even further for experienced Advisers.?

Newly Qualified Advisers

The case for younger, less experienced Financial Planners is less clear in this scenario. We can already see that the larger academies linked to self-employed Adviser businesses are failing. This appears to be due to overselling the opportunity, providing limited support, having limited client banks, and demanding newly qualified advisers find their own clients! Sometimes, they are even being charged for their leads!

It is obvious to me that far too many advisers are mis-sold the opportunity to build their own business as a self-employed Adviser, by a company unwilling or unable to fund the employed model, often taking no risk and providing no actual funding.

Starting as a self-employed Financial Planner is really tough, and very few succeed. This approach continues to give our profession a bad name. It worked in the past in a very different world, but it is not a good model for those advisers entering the profession today.

It would never happen in an accountancy or solicitors’ practice that the development of clients relies on the newbie in the corner! The senior partners carry that responsibility in those professions while the newly qualified lawyers learn their trade.

The career pattern for a young Adviser should allow them to nurture their skills as an adviser for several years before they are expected to be hunters. In the meantime, new advisers can prove their value by covering their costs through annual reviews and the ongoing servicing of the firm’s clients while also seeking referrals by delivering exceptional service. Companies must adopt a more collaborative approach, ensuring multiple contact points for clients, such as advisers, paraplanners, and administrators, working seamlessly together. The senior partners and Business owners should be responsible for bringing on the big clients.

I would personally like to see larger companies create more of a career path for younger advisers who can take on smaller transactional clients as they develop their skills and gradually move up through a firm. This is the old bancassurance model and is still used by some private client businesses.

So, while newly qualified, young Advisers are having a tough time at present, it is clear to me that the younger generation of advisers is more inclined to progress in their exams and achieve Chartered status.

Those who follow this are building a career, and if they can survive the first five years, a Chartered Financial Planner with 5 years of experience in giving financial advice will find themselves in high demand from competitors (and, of course, executive search firms like us).

Finally, in an era where we predict the increasing costs to Adviser businesses for Regulation, including implementing the Consumer Duty and integration, including technology upgrades, any short-term growth in demand for financial advice will be welcomed as it helps offset some of these costs.

As always, I would welcome your thoughts, please comment below.

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