Rule changes and filing errors: IFAs' biggest concerns in 2019

A new report from Fidelity's FundsNetwork platform looks at the top issues financial advisers are concerned about in 2019. Here are the key takeaways

A new report from Fidelity's FundsNetwork platform looks at the financial advice profession's key concerns in 2019. 

The report features research carried out by platform consultancy NextWealth, which is run by platforms guru Heather Hopkins, whose views last week on multiple platform usage caused a bit of a stir!

Her team's research asked 206 regulated financial advisers what their key concerns were in the present day.

  • 64% of respondents were from firms with five or more registered individuals or £100 million or more in assets under administration. 
  • 86% of respondents were from independent firms, with the remainder at restricted businesses. 
  • 71% of respondents were directly authorised, with the remainder an appointed representative of another firm. 
  • 14% of respondents had discretionary permissions. The remainder did not. 

Click on to read the key conclusions. 

 

A new report from Fidelity's FundsNetwork platform looks at the financial advice profession's key concerns in 2019. 

The report features research carried out by platform consultancy NextWealth, which is run by platforms guru Heather Hopkins, whose views last week on multiple platform usage caused a bit of a stir!

Her team's research asked 206 regulated financial advisers what their key concerns were in the present day.

  • 64% of respondents were from firms with five or more registered individuals or £100 million or more in assets under administration. 
  • 86% of respondents were from independent firms, with the remainder at restricted businesses. 
  • 71% of respondents were directly authorised, with the remainder an appointed representative of another firm. 
  • 14% of respondents had discretionary permissions. The remainder did not. 

Click on to read the key conclusions. 

 

80% of respondents said that compliance burdens and regulatory changes were among their top business challenges at the moment

What the report said:

'80% of advisers say the compliance burden and regulatory changes are among their top three business challenges. 50% say it’s their #1 business challenge. The top complaints from advisers are that regulation and compliance cost advisers and their clients’ time and money; the rules are constantly changing and they erode consumer engagement.'

32% of respondents said back office administration and business efficiency were a top business challenge

What the report said:

'Back office administration and business efficiency are a top business challenge for one third (32%) of advisers. Back office administration and a lack of business efficiency is driving up the cost of advice for clients. Advisers think technology can help but many don’t know what technology to use and are often frustrated with what’s been implemented in the past.'

29% of respondents are finding that business management is a key challenge too

What the report said:

'Business management issues such as training new staff and succession planning are a key challenge for over one quarter of financial advisers. Business management challenges vary based on the size and maturity of the business. Small firms struggle more with succession planning and large firms struggle more with hiring, training and technology investment.'

Investment volatility and the knock-on effects for business

What the report said:

'Among the 75% of advisers who say a business challenge is keeping them up at night, one quarter are worried about stock markets and geopolitical risk. Advisers worry stock market declines will erode portfolio values and geopolitical concerns will drive up servicing costs (due to increased number of enquiries).'

Advisers may be missing a serious trick on cyber-security

What the report said:

'Cyber security was named by only 6% of financial advisers as a top business challenge. It was selected least often among the list of options we offered advisers. We believe not enough attention is being paid to the risks to financial advice businesses from cyber security.'

Advisers describe three key issues with their current regulatory obligations:

What the report said:

  • 'Time and money: the time needed to comply takes away time that could be spent with clients. This also results in higher charges to the end client.'
  • 'Moving goalposts: constantly changing rules and the challenge of keeping up with those changes.'
  • 'Client engagement: the volume of disclosure is a real bug bear for advisers, who are worried clients pay less attention to important information as they try to wade through the mountain of paper.'

In their own words...

'The time it takes to meet necessary requirements. It takes up the majority of our time, so client costs go up as a result.'

In their own words...

'There is now so much that has to be done it is taking more and more time away from servicing clients.'

What the report said:

'Constantly moving goalposts which provide a challenge to time and resources of a small practice.'

What the report said:

'It is costing us. The main thing is our letters for simple advice are taking longer and longer to do. It is a waste of time. They are 25 pages long now, it’s getting silly.'

Back office administration and business efficiency is proving a real bug bear for advisers too

What the report said about the impact of their administrative burdens:

  • 'Less time to spend with clients: it takes time away from advising clients.'
  • 'More administration: a lot of the administration work is linked to the compliance burden.'
  • 'Back office systems: many advisers complain about back-office system upgrades and the integration between systems. Re-entering data is a particular irritation to advisers, as it increases the risk of errors, therefore increasing business risk.'
  • 'Mounting costs: advisers also say the cost of servicing clients continues to increase, forcing them to look for ways to increase efficiency. Several are adopting technology solutions, in particular outsourced back office solutions.'

In their own words...

'Our big frustration is the amount of paperwork generated by compliance and the time it takes to deal with it.'

 

In their own words...

'It’s because our back-office software isn’t very advanced, we’re constantly having to do things manually. The most important being these new charges, you have to be clear of exact levels of charges when a client changes fund. You have to be precise, but it’s not precise because the figures on their portfolios change from the point of advice to the point of implementation.'

Business management issues - including training new staff - is something advisers are finding difficult

What the report said:

  • 'Hiring and training new staff: in the past, advisers have often lamented how difficult it is to hire and train new advisers. Advisers now say it is as hard to find good operations staff as it is to find good financial advisers. Financial advice firms also suffer from "management stretch," with leaders in the business stretched across compliance, technology and HR, while many still advise clients.'
  • 'Succession planning: this is a challenge for sole traders in particular. One quarter (24%) of sole traders name succession planning as a top three business challenge compared to 8% for advisers at firms with five or more registered individuals.'
  • 'Keeping on top of everything: depending on the size of firm and the structure and support available, the specific business management challenges vary. Some advisers say keeping on top of HR, finances and client needs is a challenge, while others lament the need for oversight of processes and policies.'

In their own words...

'Finding the right people is difficult.'

In their own words...

'Tax – business and personal – it’s just difficult to keep on top of it all.'

In their own words...

'I work on my own. I am finding it hard to pass information on. It will be hard to find an ongoing service for clients if I decide to retire.'

In the wake of a torrid few months on the markets, advisers are also concerned about managing clients' expectations regarding returns:

What the report said:

  • 'Managing client expectations: clients have become accustomed to stable and growing markets. Advisers worry about how to manage client expectations in bumpier times with potential market losses.'
  • 'Delivering income to retirees: advisers worry the assumptions on which they have based their recommendations to clients may prove wrong. They feel a burden of responsibility for the advice they give clients and some worry about clients running out of money in retirement.'
  • 'Cost of dealing with more inbound queries: the cost of advice is already going up, but volatile stock markets and geopolitical upset leads to client enquiries, increasing the costs of servicing existing clients.'

In their own words...

'The markets are always going up and down. It means we get phone calls from clients. The ongoing costs are very high.'

In their own words...

'I worry clients do not appreciate how stable markets have been over the past 10 years and, with volatility returning to the markets, that they have short-term memories and start to panic about risk and investment growth.'

Just 6% of advisers say cyber security is one of their top three business challenges

What the report said:

'Among the small minority of financial advisers who say cyber security is among their key business challenges, most are worried about attacks on their own systems or want to mitigate client concerns about the security of systems.'

In their own words...

'Protecting data is becoming more complex as attack sophistication increases.' 

In their own words...

'Concerns over data hacking from clients are real, and spam emailing can lead to increased fear for clients.'

In their own words...

'Providers should confirm to clients how secure their systems are.'

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