Three months after the implementation of the Retail Distribution Review (RDR) advisers are optimistic about their future income prospects, according to the latest Adviser Barometer from Aviva.
Almost two thirds (60%) expect to increase their income over the next 12 months, compared to 17% of advisers who believe their income will decrease. A very optimistic 16% even predict their income will increase by more than 20%.
However, advisers are still worried about how much of that income they will be able retain as profit – and that concern is growing. More than half of advisers (52%) say they are concerned about remaining profitable, compared to 44% in the last Adviser Barometer in October 2012.
Other leading concerns all relate to costs and income. Paying for regulatory fees and professional indemnity costs worry 44% and 42% respectively, while new rules on legacy commission (36%) and how to generate revenue and recurring income (31%) round out the top five.
But advisers are not taking these challenges lying down – they are exploring strategies to increase income and protect profitability, including increasing the number of clients they serve. Two in five (40%) expect to increase their client base, and of this group around four in five (78%) expect to gain a similar type of client.
Where advisers expect numbers to decrease, almost a third (31%) intend to focus on higher-net-worth clients.
While overall advisers report that clients have reacted positively to adviser charging – regardless of the size of their firm or whether they are a member of a network / service provider – 44% of advisers are still concerned that they may lose up to one fifth of their client base as a result of charging. Advisers are most concerned about losing clients to the DIY online market (43%), other advisory firms (31%), product providers (13%) or banks / building societies (9%).
Andy Beswick, Intermediary Director at Aviva, says: “Our latest barometer has found a mixed message, with advisers increasingly concerned about how to remain profitable, yet they’re also optimistic about their income levels over the next 12 months.
“Their increased concerns about remaining profitable – despite adopting strategies to increase income, such as servicing more clients – may come down to worries about the impact of regulatory fees and levies and new rules on legacy commission .The Financial Conduct Authority’s increase of 13% to the financial adviser fee block can only have added to those concerns.
“Aviva recognises that working efficiently – especially in the face of increased costs – is key to preserving profitability. We will continue to invest in order to help advisers achieve this.”