"They need to look to the longer-term and particularly when so many firms are expected to leave the industry at a time when advice is needed so much, and demand is growing."
Advisers are expecting firms to shut or be sold and predict that more advisers will retire in the wake of the Covid-19 pandemic, according to research from independent analysts AKG.
This is despite seeing a rise in demand for financial advice, with the impact of Covid-19 a major driver for clients to seek support.
More than half (53%) of advisers believe firms will shut as a result of the pandemic while 45% expect more advisers to retire and a third (34%) forecast a rise in the sale of businesses.
But at the same time advisers predict demand for their services is growing with 52% saying they will attract more business from existing clients, while 48% expect more work from new clients.
Research among consumers provides further optimism with nearly one in five adults (17%) saying they specifically need advice to address financial issues caused by Covid-19. More than two out of five (44%) are concerned about the financial risks from major shocks such as pandemics.
However, the research also found that firms are struggling to attract new clients beyond personal referrals while grappling with changes to their service models.
Customers questioned for the study are more than twice as likely to prefer face-to-face advice – 55% preferred seeing a person compared to 22% who would prefer to rely on technology.
AKG’s study found the biggest barrier to consulting an adviser is that many consumers think they don’t need them – 43% of those who haven’t seen an adviser in the past five years believe they have enough knowledge to decide for themselves. Just 27% do not want to pay.
AKG is now calling on the industry to develop a longer-term strategy for increasing the numbers of advisers and clients.
Matt Ward, communications director at AKG, said: “It is difficult for advice firms to think beyond the immediate day-to-day pressures of responding to the massive impact that Covid-19 has had and is having.
“But they need to look to the longer-term and particularly when so many firms are expected to leave the industry at a time when advice is needed so much, and demand is growing.
“Intermediary distribution is the lifeblood of the financial services companies assessed by AKG and so a key part of our work in assessing the operational strength and sustainability of these companies involves close monitoring of the likely future shape of the advice market.
“Through this fresh research and its findings, we wanted to provide a platform for ongoing industry discussion and debate.”