02

Your business

Firms using Nucleus are typically smaller but look to be going from strength to strength financially, with over half experiencing an increase in turnover across 2020.

The future success of your business may be helped through demonstrating there’s a career path for the younger members of your team. However, ongoing issues around PI insurance and regulatory fees persist.

Select a region on the map to see results at regional level.

Northern Ireland excluded due to an insufficient number of responses

Assets under management

Number of employees

Turnover

Will this be an increase, decrease, or roughly the same turnover as last year?

Did the number of employees increase, decrease or remain the same across 2020?

Your people

Advisory businesses using Nucleus are typically smaller businesses, with over 80% having fewer than 20 employees.

But your businesses are growing. We asked how the number of employees within each role changed over 2020 and, on average, you told us there was a net increase in all directly employed roles, particularly RIs and in-house paraplanners.

Show them the way

So where did the increase in numbers come from? Like any business, it’s a complicated pattern.

The open market was the most common source, with two-thirds of firms recruiting staff this way. Some was driven through the promotion of internal staff (a third of firms did this) and then recruiting further down the business which can help demonstrate a career path for staff. This is a great strategy to help with the future of the business, particularly as two-thirds of responders employ at least one person under the age of 30. Demonstrating a career path exists (if staff want this), can help staff loyalty, and clearly a low turnover of staff increases knowledge of your business and furthers client understanding and continuity.

Financials

Turnover

Despite the difficulty faced by many businesses over 2020, over half reported an increase in revenue vs 2019.

This is highlighted by an overall increase in firms turning over £500,000+, which seven out of ten firms do. Some noted this had “recovered greatly in the last quarter” demonstrating a strong bounce back at the end of the year.

What percentage of firms achieved a gross turnover of over £500,000?

Will this be an increase, decrease or roughly the same turnover as last year?

Do you anticipate a rise in your regulatory and PI insurance bills across 2021/2022?

Your firms' fees

The increase in revenue will be offset by a clear and significant rise in the regulatory fees and PI insurance required.

These increased by an estimated 37% and 26% respectively. And expectations are these will continue to rise, with over 80% expecting an increase next year. Nearly seven out of ten firms don’t expect to raise fees to cope with this. Responses around why not were:

“Already increased client fees to cover cost”
“Hopefully not, unless they want firms to go under”
“A % charge makes it more difficult to increase client fees”

Persistent PI problems

Sourcing affordable levels of PI insurance remains an issue.

Not one responder found the availability of PI insurance to be easier than last year and only a handful agreed the affordability, process and terms offered were better. So we’re seeing no significant improvement in this area. Some mentioned fees had reduced as they had given up their DB transfer permissions. However, there appears little immediate correlation between these two factors across our user base.

Which of the following statements describes the availability and affordability of PI insurance this year?

In terms of DB transfer requests do any of the following apply to your firm?

Client charging methods

Regular readers of the census will know we’ve seen a progressive shift in client charging models from the percentage of assets model towards a combination view.

However, this looks to have been reversed with eight out of ten businesses charging a percentage of asset fee for clients. The reality is many are flexing the percentage of assets model to incorporate flexibility such as one-off advice charges, applying minimum or capped fees, and tiered charges to reflect a different approach for different value clients. Platforms do it, so why shouldn’t you?

For fee business how does your firm charge clients?

Does your fee structure include any of the following?

Do you charge different client segments differently?

Client value not client segment

In terms of segmentation, nearly two-thirds charge the same fee regardless of client segment, while almost 80% offer no alternative structure across segments.

Client value is the most commonly used variable within segmentation, but is one of, on average, four variables used. So it’s clear it’s the client’s value, not segment, that’s broadly driving any alternative pricing model.

A spotlight on charges

Nearly three-quarters of respondents say they’ve not been challenged by clients about their fees or fee structure. This shows most clients are happy with what and how they pay for your services.

Costs and charges disclosure documents were intended to bring transparency to the charges clients face, and any actions taken by you and your firms has been around the investment or platform charges. Only 11% of respondents say they’ve reduced adviser fees for clients, showing you believe any cost pressures should be pushed onto the investment managers and platforms. Brett Davidson has an interesting take on if you should ever negotiate on fees in our illuminate series.

Have any clients challenged your fees or fee structure?

With an increased focus on costs and charges documents, did your firm undertake any of the following activities over 2020?

Next… chapter three

For adviser use only

© Nucleus Financial Services Limited 2021

Nucleus Financial Services Limited is authorised and regulated by the Financial Conduct Authority, is registered in England with company number 05629686 and has its registered office at Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey KT13 0TS. Please note that telephone calls may be recorded in order to monitor the quality of our customer service and for training purposes.