Five big issues facing financial advisers in 2025

Ongoing regulatory change and significant announcements in the new government’s Autumn Budget, present financial advisers with a fascinating (and challenging) landscape to navigate in the year ahead.

In recent years, the Covid pandemic, soaring inflation, geopolitical instability and a cost-of-living crisis all helped create an uncertain environment in which financial planners had to advise their clients.

While the pandemic is behind us and inflation is much reduced, geopolitical instability remains a constant. As for markets, they are pricing in a 4.25% UK Bank Rate in H1 2025, which seems reasonable if incoming inflation data is broadly in line with the Bank of England’s forecast. Yet policy easing could be limited in 2025 if there are persistent upside inflation surprises.

The environment for financial advice is therefore not quite as simple as some would have hoped. Add to this significant changes to inheritance and capital gains taxes announced in the Autumn Budget, and clients are coming to advisers with yet another set of concerns.

What’s more, advisers are having to support those clients while making decisions about how to run (and future-proof) their own businesses.  

With challenges ahead, we’ve summarised five of the biggest issues facing advisers in 2025.

The impact of regulation

In both our 2023 and 2024 adviser forecasts, regulation was a key issue, and it’s no surprise that it continues to be a concern going forward. Front of mind for advisers right now are Consumer Duty, which is already in place, the Sustainability Disclosure Requirements (SDR), which are being rolled out, and the Advice Guidance Boundary Review (AGBR), parts of which are still under consultation.

“These are not small regulatory pieces and may require a cultural shift, and education, within adviser businesses,” explains Emmanuelle Mure, Head of Platforms at RBC Brewin Dolphin. “Consumer Duty has arguably already driven up the entry level at which businesses can afford to give advice. SDR is much more complex than many might have originally thought, and the AGBR and its impact on fees could affect who advisers work with.”

The key challenge for advisers here may well be the push-pull between Consumer Duty and AGBR – with the former potentially widening the ‘advice gap’, while the latter aims to narrow it. Advisers could find themselves having to make decisions around exactly which client base they intend to service going forward, whilst perhaps future proofing their business by considering other client channels that become available to them.

A new government

When Labour won the July 2024 general election, it gave the party a mandate to introduce major fiscal policy change. The first indication of what that might entail came in the Autumn Budget. While many changes were introduced, those that will most likely affect how advisers work with clients are changes to capital gains tax, inheritance tax (including on pension wealth transferable at death) and employers’ National Insurance.

“What’s also important here is that while some changes have been implemented with immediate effect, others will come into force across the next few years,” explains Kevin Silvester, Head of Strategic Adviser Partnerships, RBC Brewin Dolphin. “The inheritance tax on pensions, for instance, will apply from April 2027.”¹

This delay gives both clients and their advisers the chance to plan and structure with purpose, which may include investigating opportunities which are often overlooked, such as trusts.

“My view is that the Budget has created a fantastic opportunity for financial planners,” says James Clark, Head of Nationals, Networks and International Distribution at RBC Brewin Dolphin. “Not since Labour were last in power has a Budget created so many talking points for high-net-worth clients. And critically, the Budget has also created new clients who have been brought into the advice net.”

It’s also possible that changes announced in the Budget may well lead to an acceleration in the transfer of wealth, with conversations taking place between families, children and financial planners

A changing investor demographic

This accelerated wealth transfer has to be viewed in the context of an incoming generation of clients who might approach financial advice differently. Advisers will have to position themselves for clients who may have little or no experience of advice, and who could be digitally active and happy to interact and transact online and through apps.

 This may well lead to a fragmentation of where client money ends up. Some advisers may need to give thought to how to bring younger clients on board sooner, such as through lifestyle planning. Others may consider making technological improvements, such as giving clients an app or platform to view their investments on.

“I think the younger generation want more transparency and control over their financial future,” says Mure. “They want a more tailored and personalised experience, and they want it at a lower cost or better value, potentially.”

For advisers, this could entail giving serious consideration to the consumer experience, which may well be a key differentiator for incoming clients. “I’d suggest that the next generation will be less tolerant of poor performance, so you’ll get a lot more switching around,” says Clark. “This means advisers will really need to nail their customer service proposition.”

Optimising operations while managing risk

Considering the evolving regulatory environment, the impact of a new government and the next generation of clients – alongside an easing of wider economic pressures – means some advisers could rethink their operating model in 2025. For some, this may involve radical change.

“It could be argued in the current environment that financial planners might want to concentrate solely on financial planning,” says Silvester. “The part that clients value most is sitting down with their adviser and working out what their plan is. When it comes to more complex aspects of running a business, or managing investments, advisers may well want to rely on external expertise and partner with other professional firms.”

Yet doing so means ensuring that an appropriate risk framework is in place, which requires stringent due diligence around who they work with.

While optimising operations will mean different things to different businesses, the use of artificial intelligence (AI) to take over more routine processes could play a pivotal role. A number of firms are already using AI to ease the burden of suitability letters and recommendations made to clients – and this certainly seems to be a general direction of travel.

Ultimately, any changes to an operating model require a holistic strategic view. “Those firms that have already put in place a centralised investment proposition and a centralised retirement proposition – and those that have a clear strategy as to where they want to be in the medium to long term – are the ones who will be better set up to take advantage of the opportunities that exist in the market,” says Clark.

To consolidate or grow the business 

Taking into account all of the above, and the challenges of recent years, advisers could be forgiven for being unsure as to what comes next for their business. Decisions might already be being made as to whether to take a breath and consolidate their position, push on and grow their business, become part of a network, or potentially sell up.

And it can’t go unmentioned that the increase in employers’ National Insurance in the Budget may directly affect their business operations – be that through potential job cuts or reduced recruitment

“A lot of the firms we work with are having to revisit their model to make sure that they can work effectively,” says Clark. “And the upshot of that may be that it’s no longer cost effective, so they may choose to join a network.”

It’s only when advisers have examined their operating (and outsourcing) model, their client base, how they are using technology, their fee model and the cost of transformation, that they will be best placed to decide about the future.

“Advisers should be asking themselves how to future-proof their business, so they’re in the strongest possible position when a decision is made,” says Mure. “Be that growing it organically, through acquisitions, or achieving the best price if they decide to sell.”

How we can help

While no-one can predict exactly how 2025 will unfold, it’s clear that advisers are set for another busy year. Amid change and increased demand for advice, we’ll give you time to focus on what really matters: your clients. From the responsible investment principles that are enshrined in our business, to our in-house investment research and asset allocation expertise, you can feel confident your clients are being offered the best investment opportunities, regardless of what is happening in the broader market.

1. ^{There will be a consultation period running to January 2025 for proposed changes on the application of inheritance tax on pensions, so they may be subject to change.} ↩︎

---

RBC does not provide tax or legal advice and we would recommend that you seek appropriate advice in these areas. Rates of tax will be based on individual circumstance and tax rules are subject to change. The value of investments, and any income from them, can fall and you may get back less than you invested. Neither simulated nor actual past performance are reliable indicators of future performance. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.