Financial advice businesses are performing strongly but more needs to be done to help them grow, especially among the smaller end of the advice market, according to the Lang Cat.
Building on the launch of its latest survey last week, the consultancy revealed the financial advice sector is still "very dominated" by small firms, who might have between one and five advisers.
These are "very important" but according to Steve Nelson and Mike Barratt of the Lang Cat, size really does matter in terms of addressing the growing advice gap.
Speaking on a webinar today (July 9), Barratt, consulting director for the Lang Cat, said: "Size is quite relevant when we talk about the potential role of the advice professional in addressing the advice gap.
"A lot of those businesses are pretty small so they're not going to necessarily have the capital to invest in developing new services, new products or implementing new technology.
"Also, many advice companies are not taking on clients who are less profitable, but focusing more on delivering great service to their core client base."
While revenues have grown strongly despite the pandemic bump in 2020, as one of the four charts above show, and businesses are being run well and profitably, the latest Lang Cat study - the Advice Gap Report - said finding growth in the years ahead is "going to become more difficult".
Comparing this to the platform sector, which again is showing strong profits and revenues, but not a huge amount of growth, Barratt said: "We know it's not a direct proxy to the advice sector but we're not necessarily seeing a lot of growth in either sector."
Potential capacity
A lot of this, as previously reported, could be attributed to Consumer Duty, and client segmentation, whereby in order to demonstrate full value and best outcomes, the vast majority of advisers have gravitated to clients with more than £250,000 to invest.
However, Nelson, insight director for the consultancy, said the study also showed there was an appetite among advisers to do more - but providers, technology companies and government all needed to play their part to help advisers of all sizes serve more clients at the lower end.
He said: "Advisers say they know the technology is available, and they want to implement it but the costs and difficulty in terms of making the business more efficient, sorting out the back office system and so on, makes it harder - especially for smaller companies."
According to the study, Nelson said advisers "across the profession" were telling the Lang Cat that if all the service standards and technology worked better, they could unlock up to 40 per cent to 50 per cent additional capacity to serve more clients and grow their businesses.
