Happy new year to those I’ve not connected with yet in 2024. I hope you enjoyed a fantastic break. 2024 has started with a bang and the wealth management industry is buzzing already.

In this first newsletter of the year, I want to take a look back at some of the big themes from last year and point to new trends we’re exploring in 2024. First, I want to give you an update on the business.

NextWealth business update:

2023 was a big year for NextWealth. We celebrated our five-year anniversary; an important milestone for our business. We are grateful for the support of our clients and to everyone who contributes to our research. Thank you.

We continue to focus on wealth management and specifically financial advice, looking at business models, investment propositions and tech. In 2023 we continued that focus but added a string to our bow. Emma Napier joined as Consulting Director and is helping firms take action based on the insights from our reports and events. She’s already worked on some fascinating projects on price comparisons, proposition development and distribution strategy.

Looking back at key themes for 2023

• Consolidation and aggregation: Despite higher borrowing costs and questions around exits for consolidators and their PE backers, the pace of consolidation and aggregation of financial advice businesses continued to accelerate in 2023. As the year progressed, we saw more pressure on firms to integrate acquired businesses with implications for DFMs in particular.

NextWealth report: Consolidators and Aggregators, April 2023, update coming in March 2024

• Rise of the planner: Financial advice firms that call their external-facing staff ‘planners’ on average have stronger ambitions for growth, are more likely to employ younger planners and work with younger clients. They hold higher levels of qualification and are less likely to be looking to exit or sell the business. While changing a label isn’t going to change the business it suggests that the future of the industry lies with financial planners who take a more holistic view of advice, across families and product lines.

NextWealth report: Financial Advice Business Benchmarks, September 2023. Update coming in September 2024

• Price and value: The Consumer Duty put a huge amount of focus across the industry on price and value. Financial advice firms have always played an important role in finding good value products and services for clients. Last year, pressure on advice fees intensified. The average on-going fee for financial advice fell 4bps to 64 bps. The average all-in fee fell from just under 2% to 1.75%. We’ve charted the rise of low cost MPS players over the past few years and pricing pressure continues to intensify. At the same time, we saw a slight increase in allocation to active funds among DFMs and Waverton joined our top 10 providers of discretionary MPS, proving it’s not just about cost. A lot more change is coming on fees and charging models. Firms are doing a lot of work on benchmarking fees and embedding processes to demonstrate value. That theme will persist for years to come.

NextWealth report: Financial Advice Business Benchmarks, September 2023. Discretionary MPS Proposition Comparison Report, December 2023.

• Operating models: The target operating model of financial advice firms will increasingly define a systems-based approach comprising a system of record and a system of engagement. The target operating model will allow firms to dramatically shift the ratios within firms of fee-earners to non-fee-earners (1:1 to 4:1) and advisers to clients (1:94 to 1:250).

NextWealth report: Delivering Operational Leverage, November 2023. Great Platform Shake-Out, February 2023.

What’s next?

Looking ahead

We’ll be kicking off the year with a report on The Future of Financial Advice. The report defines a new segmentation model for UK financial advice firms and offers a view of the future size and shape of the market including number of customers, advisers and firms. It considers implications for asset managers, platforms, tech providers and everyone across the supply chain. You can pre-register to get a copy here.

We’ll be discussing and debating all of these trends at our annual conference, NextWealth Live, on 19 March 2024. We have about 40 tickets left. If you plan to attend and don’t yet have your ticket, I’d recommend getting your skates on.

2024 looks set to be another important year for our sector. Since I set up NextWealth in 2019, we have seen continued regulatory disruption, market volatility, rising interest rates and tech innovation. We look forward to continuing to help our clients adapt, innovate and thrive amid disruption.

Heather