The Adviser Snapshot, which researches the adviser firm market to assess how firms are reacting to the implementation of the RDR and FCA, also revealed 70% of smaller advisory firms expect to be offering the same services over the same timeframe.
Larger firms anticipate further growth, both in terms of adviser numbers and clients.
The cost and complexity of regulation is seen as one of the greatest threats to success, with almost three quarters of participating firms citing this factor, while over-reliance on a key person was seen as the next biggest threat by 40% of small firms.
DIY investing was seen as the greatest threat to competition (44%), followed by competition from other firms setting up internet offerings on either an advised or execution-only basis.
Client relationships
Almost half of financial advice firms feel they do not maximise existing relationships, and over 90% rely primarily on referrals from existing clients and from professional connections for new clients,
Not acquiring enough of the right kind of clients, and having too many clients that are not profitable was also of concern to 36% and 20% of firms respectively.
Other concerns
Smaller firms are generally confident they are meeting the Treating Customers Fairly (TCF) outcomes, which are in place to ensure an efficient and effective market and to help consumers achieve a fair deal, although over half are able to articulate what the outcomes are.
Around 40% of small firms were not confident they kept the appropriate paperwork and documentation to document or provide evidence of their TCF action.
In reference to this, the report said: “This reinforces our concern that while most firms believe they are treating customers fairly they are not sufficiently aware of the TCF requirements and importantly are not paying sufficient attention to demonstrating this.
“Given that the FCA has emphasised that TCF remains core to how they expect firms to treat their customers, this would seem to be an area to which firms need to pay considerably more attention.”
Advisers revealed their favoured post-RDR fee models in a survey conducted in May.
