Professional Adviser: Look ahead to 2024: Are advisers prepared for a growth play?

With 2024 just around the corner, advisers aspiring to grow their businesses must evaluate whether their operations, technology, and business model can support the growth they hope to achieve, writes Jim London.

The converging of two generational shifts presents UK advisers with both challenges and opportunities as they build their growth strategies for 2024 and beyond.

As part of the Great Wealth Transfer, UK boomers will pass on an estimated £5.5trn to their offspring over the next three decades. As millennials become the richest generation in history, advisers may need to incorporate a greater array of asset classes into their client strategies.

Alternative investments are exploding in popularity, especially among younger investors. Organic growth among alternative funds nearly doubled over the past three years. Retail investors are now the fastest-growing segment of the alternative investments market with more growth expected in the coming years. As regulations ease and technology advances, retail investors and their advisors will enjoy wider access to this asset class. 

As retail demand for alternative investments grows, so do the number of digital alternative investment platforms. These aim to broaden access, simplify the investment process, increase transparency, and potentially lower costs. But the key is for advisors to be able to integrate these platforms into their existing infrastructure.

Most transactions conducted on these platforms focus on established alternative asset classes. These include real estate, private equity, private credit, and hedge funds. But virtually anything is tradeable and niche platforms can support everything from securitized music royalties to artwork and wine.

Advisers play a critical role in helping their clients build portfolios that meet their short- and long-term goals. This is especially true when adding alternatives to a traditional portfolio. Advisers must help their clients understand the unique risks and rewards inherent in these products. They must also ensure that they add these products to a client's investment portfolio in a carefully considered way reflecting the client's goals, comfort with risk, and other factors.

There's another generational shift underway

The IFA landscape is undergoing its own generational evolution. One in five IFAs in the UK plans to retire within the next five years - not surprising when you consider the average age is 58.

In addition, as IFAs look to better position themselves for growth, IFA consolidation is becoming more common. In fact, IFA consolidation was up 11% in 2022 through September, from 398 to a record 440, according to research. We expect similar or even higher volumes in 2023.

Whether an IFA is looking to recruit a successor or consolidate with other IFAs, infrastructure is a critical success factor. To attract these opportunities, IFAs need technology that can seamlessly integrate with new systems and scale with future growth. And their technology needs to be able to meet the high expectations of tech-savvy millennials. Expectations that include competitive pricing, seamless integration, rapid feedback, information transparency, and even community. That's a high bar for any firm to meet.

Partnering with an experienced operations provider can be a strategic way for IFAs to achieve these technology goals. Plus, outsourcing this work can free up their time and resources to focus on what they do best: supporting the needs of their individual clients, onboarding new firms with minimal disruption, and growing their business.

Strategic partnerships can provide the technology expertise needed to support a client-centric experience, from finely tuned messaging and scalable sales coverage to custom platforms that help enhance the client experience and improve operations. Choosing a strategic partner that understands a business' unique goals is pivotal. Industry experience building future-proofed technology can save money now - and as business' goals and client expectations grow.

With 2024 just around the corner, advisers aspiring to grow their businesses must evaluate whether their operations, technology, and business model can support the growth they hope to achieve.

The article first appeared in Professional Adviser.

Important information

Alternative investment funds by their nature involve a substantial degree of risk, including limited liquidity, lack of regulatory oversight, tax risks, investment risks, risks inherent to investments in highly volatile markets, risks related to international investment, risks pertaining to various investment techniques that may be employed by the fund, risks related to the ability to diversify investments, risks related to the accuracy of valuations of investments, conflicts of interest, and the risk of complete loss of capital and are only appropriate for parties who can bear that high degree of risk and the highly illiquid nature of an investment.

The following information can be sourced to:

• UK boomers will pass on an estimated £5.5trn to their offspring over the next three decades: abrdn

• Alternative investments are exploding in popularity, especially among younger investors: Yahoo! Finance

• Retail investors are now the fastest-growing segment of the alternative investments market: SEI

• One in five IFAs in the UK plans to retire within the next five years - not surprising when you consider the average age is 58: The Private Office

• IFA consolidation was up 11% in 2022 through September, from 398 to a record 440: FT Adviser