The study of advisors' views in the UK shows what challenges most concern them – shedding light on forces such as the Consumer Duty regulatory regime, for example.

Ageing clients, the impact of war and related geopolitical instability, and the effect of a new UK regulatory framework – Consumer Duty – are uppermost on wealth advisors’ minds, according to a recent survey from Schroders.

The 2023 Schroders UK Financial Adviser Survey – drawing replies from 254 advisors – found that clients have become increasingly bearish as the year has progressed, despite interest rates stabilising and inflation starting to fall. The highest concern by some margin for advised clients, is the prospect of losing capital, with 59 per cent ranking this as their number one worry, the report found.

Two-thirds (66 per cent) of the advisors surveyed expect a higher level of disruption in future due to geopolitics. The cost-of-living crisis continues to be a key influence, with 89 per cent of advisors reporting that some of their clients have adjusted their portfolios as a direct result.

Such worries may have spurred more advisor conversations with clients on merits of cash versus long-term equity investing. For example, whilst the Schroders UK Financial Adviser Pulse Survey conducted in May this year found that 90 per cent were already engaging with clients on this matter, the latest survey finds that this proportion has now risen to 95 per cent.

The survey shone a light on the kind of challenges and concerns clients have, such as transferring money safely to the next generation and market risks. It also showed that attracting business from younger people is not as high a priority for firms as it might be, and that the “mass-affluent” segment is a client cohort that wealth firms still need to serve more effectively.

Red tape blues
In terms of the specific challenges facing advisors, almost half (49 per cent) cited regulation as their main concern, up from a third (32 per cent) in November 2022. This likely follows the introduction of Consumer Duty, which came into effect in July this year, Schroders said but perhaps also in anticipation of the outcome of the Retirement Income Review and the numerous “Dear CEO” letters.

The proportion of advisors who think Consumer Duty will have a high or reasonably high impact on their business shifted significantly from 25 per cent in May to 41 per cent with a corresponding reduction in advisors thinking that this will have a low impact. 

Additionally, the survey revealed that 69 per cent of advisors anticipate that the Consumer Duty's “fair value” requirement will exert pressure on their charging models.

The Consumer Duty regime states that firms should provide customers with products and services that meet their needs and offer fair value. Customers should receive communications which they can understand. They should get the customer support they need when they need it. St James's Place recently unveiled charging changes to its funds, with the Duty seen as a motivating force.

Older or younger?
The Schroders report noted that despite the growing industry awareness of the risks and opportunities associated with intergenerational wealth transfer, attracting younger clients is “not a top priority for the majority of advisors.” This is evident from the ageing profile of their client bases and the fact that only 25 per cent of advisors would provide advice to clients with less than £50,000 ($63,258) to invest, a steep decline from 52 per cent in 2019.

In addition, only 10 per cent of advisors reported having a strategy for retaining, attracting, and advising women. It is crucial that advisors do not overlook their female clients, with recent research from Schroders indicating that only 34 per cent of widows will remain with the existing family advisor.