What will the Financial Broker market look like in 2030?

Last month I introduced a research project that I was fortunate to deliver for Brokers Ireland with the aim of developing 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 own objectives and optimise their support services to best meet the needs of their members, and to consolidate and grow their positioning as the leading representative body for Financial Brokers in Ireland, and indeed as the voice of the sector.

In last month’s article we looked at the market today. Now we’re going to take a leap into the future and examine some of the key themes that the research revealed as to how the market will look in 2030.

The general outlook

Overall, the future demand for financial advice is expected to grow, with the future for Financial Brokers looking bright. This positive outlook is shared by Financial Brokers themselves. In a survey carried out in 2022, almost 50% of them agreed with the statement ‘The future is very bright for Brokers, I expect the market share of Brokers to increase’, with only one in five answering negatively to it.[1] Brokers currently enjoy a market share of approximately 74% and there is every expectation that this share will remain stable in the coming years.

This positive outlook in relation to the demand for advice and to the independent advice sector is shared across all global markets. As consumers make transitions throughout their lives and indeed as regulation, products and the financial backdrop within individual markets change, there is a need for expert independent advice to optimise consumer outcomes.

The biggest cloud on the horizon for Financial Brokers may come from the broader economic environment, with the outlook looking quite gloomy today. However, time and time again Brokers have demonstrated their resilience in dealing with negative external forces. The political landscape in Ireland could also experience significant change over the next decade, with some consequences for the sector.

Preventing an advice gap

The greatest challenge in relation to the demand for advice is reaching people who have never interacted with a Financial Broker and are unaware of the benefits this can bring. This challenge is one that exists in every corner of the world. As an example, it is estimated that 83% of the population of the USA have no adviser. Since the Retail Distribution Review (RDR) was introduced in the UK a decade ago, one of the major impacts has been the narrowing of the financially advised population. Similar trends have been experienced in other markets, as consumers are unaware of the value of advice and advisers cannot deliver advice in a profitable way to consumers with more limited financial resources. This has to be one of the biggest challenges for both Financial Brokers and regulators in Ireland – preventing an advice gap widening in Ireland.

In building relationships with new consumers of financial advice, the challenges of engaging the younger generations and engaging a more diverse audience were noted. These themes will be examined in more detail in future articles.

The target markets of the future

While there will be some exceptions of successful, scaled businesses with large client service machines enabling them to reach a wide group of clients, the expectation is that the Financial Broker of the future will work predominately (but not solely) in the mass affluent and high net worth segments.

The sense of most people, and lessons from other markets, is that the successful Financial Brokers of the future will be ones with deeper propositions, offered to narrower target markets – their goal will be to look after all the needs of some people. Being expert with such groups enables an advice firm to stand apart from their peers and be the ‘go to’ expert in that market. The likelihood is that Financial Brokers will seek to differentiate themselves from their peers through deeper knowledge of specific client groups or by demonstrating superior expertise in specific product areas.

The importance of every Financial Broker having their own business proposition that is then rolled out to their customers was a recurring theme. The future of successful Financial Brokers is unlikely to be as ‘product takers’, with their proposition simply being an additional advice layer to the product offerings of their favoured product provider. The expectation is that technology will play a far greater role in the delivery of advice by Financial Brokers. Again, these themes will be examined in more detail in future articles.

The 3 big questions

Over the next editions of newsletters, I’m going to examine each of the 12 ways that were identified as enabling Financial Brokers to prepare for 2030. Each of these will help you to answer the three most important questions for your business,

  • Who your clients of the future will be
  • What services you will offer
  • How you will deliver these services

[1] Brokers Ireland Financial Broker Survey Report 2022