Key insights from the FE fundinfo Financial Adviser Survey 2020

The 2020 FE fundinfo Financial Adviser survey is now in its 5th year running. Between the months of November and December 2019 (before the Covid-19 pandemic), we asked 271 financial advisers about their 2020 outlook.

27 April 2020

The 2020 FE fundinfo Financial Adviser survey is now in its 5th year running. Between the months of November and December 2019 (before the Covid-19 pandemic), we asked 271 financial advisers about their 2020 outlook. We anticipate this viewpoint has now shifted given the current circumstances, but our findings look in some depth at 4 key themes affecting financial advisers that Fund Managers should be aware of. This article will give oversight of areas at a high level.  We will then dive into each key topic in more depth over the coming weeks; sign up to our blog alerts here.

Given financial advisers generate the highest AUM amongst third-party fund distribution in the UK 1; an insight into their business outlook can give valuable insights to Fund Managers looking to influence them. Given the current economic climate surrounding Covid-19, fund managers who are able to meet the needs of advisers and adapt to their changing demands, are undoubtedly better placed to grow their business in the choppy markets ahead.

Key findings

The 2020 Financial Adviser Survey picks up on the following 4 key themes:

  1. Pre-Covid-19 positive business outlook.
  2. The impact of regulatory change including the effects of MiFID II.
  3. The benefits and trend toward investment outsourcing.
  4. How ethical investing has grasped investors following the ‘Greta effect’.

1. Pre-Covid-19 positive business outlook

Prior to Covid-19; 54% of Financial Advisers stated they had a positive business outlook for the new year. This increased by 12% in comparison to the outlook anticipated for 2019, and only 5% predicted a negative outcome of the new year. Whilst Covid-19 has had a significantly greater economic impact than previous crises such as the 2008 global financial crisis; the financial advice industry seems well equipped to deal with this one against a backdrop of a growing need for financial advice.

The increase in positivity last year is for good reason; demand, revenue and turnover have increased. With that, the industry has reported a surge in new client numbers in comparison to 2019 (see chart below). With 52% of advisers reporting an increased turnover of at least 5%, and almost 30% reporting turnover increasing by over 10%. 78% of advisers surveyed also reported an increase in new client numbers, with only 1.4% reporting a reduction.


2. The impact of regulatory change including the effects of MiFID II

The burden of regulation is the biggest cause of concern in the running of an adviser practice with almost 85% of firms citing reporting/regulation as one of the most common drivers of increasing operational costs.

The benefits of MiFID II are beginning to shine as firms pass through the implementation phase. Whilst opinions are still mixed, it seems the regulation has had a relatively low impact on adviser practices nearly 2 years after implementation.

On the contrary, satisfaction with PRIIPs and KIIDs were significantly lower, with only 20% of Advisers recognising the benefits for their end clients and 80% disagreeing with its effectiveness. 30% of advisers also felt it was difficult to get accurate and useful information out of fund groups, such as ex-post costs and target market assessments.

3. The benefits and trend towards investment outsourcing

More than 57% of advisers in the survey now use 3rd party model and managed portfolios in some capacity (up from 50% last year).

This increase in demand affirms the burdens outlined above (regulation, staffing, DB costs etc.) and support the trend that outsourcing to 3rd party providers is the growing solution for advisers to help focus on their ‘core’ service of financial planning. Over 60% of advisers claimed that using 3rd Party MPS services had improved client outcomes, reduced risk and administrative burdens.

Since 2018, the number of financial advisers using 3rd party MPS providers has steadily been increasing by an average of 6% each year. The two main criteria according to advisers in choosing a preferred MPS provider is investment methodology and performance.

With more than 57% of advisers using 3rd party MPS providers and managed portfolios in some capacity (up from 50% last year), a targeted distribution strategy for fund managers is necessary to ensure AUM growth and influence those that no longer ‘pick their own funds’. (Did you know? More than 1,300 adviser firms have access to over 45 model portfolios via our MPS Directory on FE Analytics).

4. How ethical investing has grasped investors following the ‘Greta effect’.

Investor trends have strongly indicated a preference towards ESG investing, and unsurprisingly this has become more mainstream. The ESG market has benefited from a 35% increased exposure from Financial Advisers too, with over 50% claiming to incorporate ESG factors into their investment propositions and 37% considering incorporating it.

Nearly 82% of advisers predict that the demand for ESG propositions will increase in 2020. Meaning there is a growing demand in screening out non-ESG compliant firms. However, a lack of understanding of the ESG sector at a client level is evident with the majority of advisers (62%) stating their clients don’t have a complete understanding of the sector.

Once stability returns post Covid-19 there may well be new clients desperately in need of good financial advice. It seems that if advisers can weather the storm, they should emerge well-positioned to support those investors who have suffered during difficult markets. They face operational pressures however, in running their businesses and there are ways Fund Managers can help.

In the next article of this series, we’ll explore in more detail why more advisers are favouring outsourced solutions than ever before and the challenges that brings to Fund Managers looking to reach them.

Until then, you can download the full report here:

Download Adviser Survey 2020

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