Over more than a year since the UK wealth management sector was shaken up by the largest regulatory change in recent history, a survey of independent financial advisors says under half of such firms (44.8 per cent) want to get out of the business between now and 2019.

Over a year after the UK wealth management sector was shaken up by the largest regulatory change in recent history, a survey of independent financial advisors says under half of such firms (44.8 per cent) want to get out of the business between now and 2019.

Plans to exit have been brought forward as the number of IFAs expecting to sell have risen sharply since Harrison Spence, a firm advising such businesses on strategy and M&A, last polled the sector six months ago. (To see an interview by this news service with Spence, see here.)

Earlier this year, 26.6 per cent of firms polled by Harrison Spence said they planned to sell within the next five years and just 5 per cent expected to do so within 12 months. At present, just over a third (37 per cent) have no plans to sell at all, compared to 57 per cent in April 2014.

“Our experience suggests that this instinct to sell is on the rise, in line with the valuations attached to IFA businesses, which are on a general upwards trajectory as demand outstrips supply,” Brian Spence, managing partner of the firm, said in a statement. “However, if a glut of firms comes to the market over the next five years, prices may fall steeply,” he said.

The findings of the poll add fuel to controversy over whether the Retail Distribution Review reforms of financial advice, such as the outlawing of trail commissions and pushes for higher qualifications, have made the industry uneconomic for many firms, sparking a rash of M&A deals. It has been stated – including by Spence – that the RDR has created an “advice gap” problem with many clients no longer catered for by wealth managers because their custom is unprofitable. Meanwhile recent years have seen the advent of technology-driven platform services designed, so their owners say, to deal with this issue. (For more on this point, see here.)

Elsewhere in its survey, Harrison Spence said 48 per cent of business owners understand that good business practice such as strategy, planning and cost control are likely to have a bigger impact on the value of their business than simple supply and demand or external factors, such as the cessation of trail. The survey was conducted among 230 respondents in the industry between late September and early October.