The Financial Broker market in Ireland today
We were delighted to be asked by Brokers Ireland in 2022 to complete an extensive research project to develop a future-facing view of what the Financial Broker sector will look like in 2030. The primary purpose of the research was to inform Brokers Ireland as to how they can shape their objectives and support services to consolidate and grow their positioning as the leading representative body for Financial Brokers in Ireland, and indeed as the voice of the sector.
A secondary piece of work was also commissioned to extract the key learnings from this report, with a view to helping Financial Brokers prepare your own businesses for the future.
The research methodologies included focus groups with Financial Brokers, interviews with senior executives from product providers, interviews with other service suppliers to the sector and interviews with experts from five developed markets outside of Ireland – namely the UK, USA, South Africa, Australia and Canada. This was further supplemented by structured consumer research and online survey research carried out with Financial Brokers. Extensive desk research was also carried out to build out a comprehensive view.
Over the course of the next year or so, we will share the key findings from this research, beginning below with a piece about the advice market as we see it today.
A market in rude health
Financial Brokers in Ireland are the dominant distribution channel and source of financial advice and personal financial products for consumers in Ireland. When investment-only business is excluded, the channel currently commands an estimated market share of 74%. This is a significant increase on the Financial Broker market share that had fallen to 54% before the financial crash in 2008. Financial Brokers have demonstrated your resilience and value to consumers over the last 15 years.
The overall personal finance market in which Financial Brokers enjoy a commanding position has been very buoyant in recent years. The market experienced growth overall of 23% in 2021, which continued with further growth of 23% in the first half of 2022.
The changing role of the Financial Broker in Ireland
While the core role of Financial Brokers as the primary source of expert and independent financial advice in Ireland continues, several factors have fundamentally changed the business models for many of you. These changes have been largely positive and have enabled you to grow more sustainable and valuable businesses. They include:
- The growth of trail commission as a mainstay of the remuneration model of Financial Brokers.
- The negative deposit rates (that are currently inching upwards again), offering good opportunities to Financial Brokers to offer better saving and investment alternatives.
- The growth of financial planning as part of a deeper service proposition.
- The impacts of COVID, which resulted in Brokers embracing process improvements in the shape of remote meetings with clients, the use of digital signatures etc.
- The upskilling of Financial Brokers in the form of professional education qualifications and the use of technology in areas such as future cash flow planning.
The general opinion among interviewees is that Financial Brokers simply have a better value proposition than other channels such as banks, direct sales forces and online providers. Your personal touch, your independence and your comprehensive offerings enable you to stand apart. The resilience and adaptability of Financial Brokers was also remarked upon on numerous occasions by interviewees. A recurring theme was that the future of Financial Brokers constantly seems to be threatened by some external force, but you continue to manage hurdles in your path, survive threats that you face, and ultimately thrive.
The Financial Broker market globally today
Generally, across the world, the independent financial adviser markets are in rude health. Several common themes emerged in relation to those markets today.
- Reaching the non-advised community is the biggest challenge facing the sector globally.
- There is an ongoing drive for increased proficiency and upskilling globally within the profession.
- The older age profile of advisers and the challenge of bringing in new blood is an ongoing concern in all markets.
- The enormous and disproportionate burden of regulations and compliance requirements that are faced by often “micro-businesses” is a significant issue for the sector.
- All markets are experiencing an ongoing drive for increased transparency for the benefit of consumers.
Next month, we will set out a summary about the expected evolution of the market over the next 7-10 years. Following that, in each of our subsequent newsletters, we will share one of twelve action areas for Financial Brokers to prepare your own businesses for 2030. These action areas are also contained in an information guide that Brokers Ireland have produced for Financial Brokers.
We hope you find this research interesting and thought-provoking.