85% advisers worried about rising costs

• 85% of advisers are expecting a rise in overhead costs over the next six months
• Two fifths (39%) believe rising costs could impact their business over the next year, with firms attributing concerns to simultaneously falling revenues
• Firms are relocating offices (29%), investing in new platform technology (28%) and increasing client fees (26%) to help manage cost pressures

Advisers are forecasting rising operational costs over the next six months alongside falling revenues, according to new research from abrdn.

Nearly nine in ten (85%) UK advisers expect their operating costs to increase in the next six months.

Two fifths (39%) of respondents said they were concerned that cost increases could threaten their business in 2023.

When asked why, advisers most frequently cited increased vulnerability due to falling revenue – either due to clients’ invested assets decreasing in value (46%) or because clients were withdrawing more from their investments (44%).

Jonny Black, strategic director, abrdn, Adviser, said: “Advisers are being hit from two sides. Like businesses across the economy, firms are battling cost increases in everything from labour to energy. Meanwhile, as a lot of adviser charges are percentage based, they are seeing reduced fees because revenue has been hampered by recent market performance and because clients have adjusted their investment levels in the cost-of-living crisis. It’s costs up and revenue down for a lot of advisers.

“Firms must walk a fine line when managing these pressures. There is only so much they can do to reduce operational costs without affecting service levels and their operational effectiveness. Management teams will also be wary of turning to increased fees.”

abrdn’s research revealed that two in five firms (44%) have, or plan, to make changes to their business to manage the impact of increased overhead costs.                                                     

More than a quarter (29%) have or will relocate their office locations – rising to more than two fifths of networked businesses (43%).

A similar proportion are investing in new platform technology (28%), led by directly authorised firms (41%).

Meanwhile, just over a quarter (26%) of firms are or will be increasing fees charged to clients, led by networked businesses (36%).

Jonny Black added: “It’s welcome that so many businesses are already turning to platform solutions to help them navigate the period ahead.

“Platform technology – and the expertise and resources of platform providers – has a central role to play in helping firms unlock all-important operational efficiencies by helping businesses manage workloads faster.

“But the benefits don’t stop there. The right platform partnerships also support better client outcomes and help improve firms’ service quality. This, in turn helps firms compete, and grow their client bases.

“Firms are facing stiff operational headwinds. But this year will bring new opportunities for growth. Ensuring the right technology and partnerships are in place will help put them in the strongest possible position to capitalise on whatever arises, and mean they can continue to provide the quality of service that their clients so value.”

ENDS

 

Media enquiries

For further information, contact:

Calum Anderson
E: Calum.Anderson@citypress.co.uk
T: 0131 460 7922                                              

Rachel Cashmore
E: Rachel.Cashmore@abrdn.com
T: 0734 170 3358

Methodology

Survey of 302 UK financial advisers regulated to give financial planning advice on long-term savings like pensions and ISAs, conducted by Censuswide on behalf of abrdn in November 2022.

Notes to Editors

abrdn is a global investment company that helps clients and customers plan, save and invest for their future.

abrdn manages and administers £508 billion of assets for clients, and has over 1 million shareholders. (Figures as at 30 June 2022).

Enabling our clients to be better investors drives everything we do. Our business is structured around three vectors – Investments, Adviser and Personal – focused on their changing needs.

For UK wealth managers and financial advisers, we provide platform technology, expertise and support to make it easy for them to run their businesses – and to deliver the outcomes their clients want.

We offer content and experiences that can be personalised to suit every type of business and client, giving advisers powerful data and insight to make better decisions.

We’re the number one adviser platform business in the UK for assets under administration (Fundscape Q1 2022). We’re also the first UK adviser platform provider to receive and retain an ‘A’ rating from AKG for the financial strength of our platforms (AKG financial strength reports 2021).

As at 30 June 2022, our Adviser vector administers £68 billion of assets.

Investment involves risk. The value of investments, and the income from them, can go down as well as up and an investor may get back less than the amount invested. Past performance is not a guide to future results. The details contained here are for information purposes only and should not be considered as an offer, investment recommendation, or solicitation to deal in any investments or funds and does not constitute investment research, investment recommendation or investment advice in any jurisdiction.

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