Financial planning firms in the UK are optimistic about growth over the next year, according to the inaugural Financial Planning Growth Index from Saltus Partnership Programme and L.E.K. Consulting.
The research found 70% of firms were optimistic, with 47% confident and 23% very confident about increasing their revenues.
Additionally, 84% anticipated a rise in assets under management (AUM), while 16% expected no growth.
Expectations varied by firm size, with larger businesses more positive.
Half of larger firms, with AUM above £300m, expected AUM to grow by at least 10%, and 11% anticipated growth of at least 20%.
In contrast, 78% of mid-sized firms expected growth of up to 10%, and only 20% foresaw growth above 10%.
Smaller firms, with AUM up to £50m, were more cautious; 44% expected growth to be no more than 5%, while 25% anticipated flat AUM or a decrease.
Organic growth was expected to be the main growth driver for 40% of firms.
Other sources included client referrals (32%), improved investment performance (26%), technology and automation (15%), partnerships (10%), and digital marketing or social media (6%).
Additionally, only 4% saw acquisitions as a growth path, mainly larger firms (18%), compared to 5% of those with AUM between £50-300m and 1% of firms with AUM below £50m.
Regulatory compliance was a primary concern for 29% of firms, followed by political intervention (20%), rising operational costs (19%), economic uncertainty (14%), and talent acquisition (8%).
Despite these challenges, 37% felt well-prepared, and 49% felt moderately prepared.
Long-term challenges over the next three to five years included the regulatory environment, technological advancements like AI, and the widening advice gap.
Among large firms, 21% cited regulatory changes as significant, while smaller firms focused more on tech advancements, with 18% of mid-sized firms and 21% of smaller firms emphasising this concern.
Economic and market volatility was only a major challenge for a small percentage of firms, with 9% of small firms, 11% of mid-sized firms, and 7% of larger firms noting this.
Nick Heath, head of relationship management at Saltus Partnership Programme, said: “Senior leaders in the financial planning sector remain optimistic about the future despite a number of headwinds impacting their businesses.
“To deliver growth, firms must be adaptable in their approach and focus on streamlining operations, continuing to attract and develop talent and embed innovation to drive the best possible outcomes for clients.”
Heath added: “The role of technology in enabling firms of all sizes to meet these challenges head-on and underpin their growth ambitions remains paramount.
“Innovation is no longer a luxury available exclusively to the largest firms in the market, and the Saltus Partnership Programme is designed to enable firm leaders to support across the piece including financing, access to tech and a range of operational services that will enable growth and continue doing what they excel at, looking after their clients.”
Bronswe Cheung, partner at L.E.K. Consulting, said: “The outlook for the UK’s financial planning sector is promising. It is clear the way in which firms expect to grow varies, with larger businesses leveraging acquisitions to capitalise on their scale and resources.
“But driving organic performance remains the key growth driver for firms of all sizes and reiterates the importance of a relentless focus on clients, delivering exceptional service and performance, in delivering growth.
Cheung added: “As financial planning businesses scale, the complexity of delivery increases and can be a barrier to growth.
“Scale brings added regulatory requirements, a higher cost base and added risk, all of which can stifle ambition if not approached in the right way.
“There are solutions to these challenges that require an innovative outlook and a willingness to embrace change, working in partnership with others to ensure these growth ambitions can be realised.”
