The UK financial advice market is undergoing significant change as private equity (PE) firms drive a wave of consolidation. While aimed at creating larger, more efficient firms, this trend has led to unintended consequences—a paradox where consolidation spurs the rise of new firms.

Over the past decade, increasing regulatory demands, such as the Retail Distribution Review (RDR), have raised costs, pushing smaller firms to sell. PE firms seized this opportunity, acquiring solo and small adviser practices. However, while firm numbers have declined, adviser numbers have not kept pace. In fact, many advisers are breaking away to start their own businesses, often leveraging networks to streamline the process.

In 2023, the number of solo adviser firms fell by 249, and small firms saw similar declines. Yet large firms gained only 116 advisers, highlighting the talent war consolidators now face. With many advisers preferring the independence and equity ownership offered by smaller firms, large consolidators struggle to attract and retain talent.

Adding to the challenge is a lack of investment in technology and operational efficiency. Adviser productivity has fallen, particularly in large firms, where profitability lags behind smaller counterparts. Despite their scale, larger firms are seeing reduced client engagement and adviser satisfaction.

The future of adviser growth lies in flexibility, tech integration, and better support for advisers. Solutions like Timeline’s innovative planning tools can help improve efficiency and client outcomes, but consolidators must adopt these technologies to remain competitive.

Ultimately, consolidation may not slow down, but its unintended consequence—the rise of breakaway firms—will continue to shape the market. For every firm acquired, new entrepreneurial firms emerge, ensuring a vibrant and competitive advisory landscape.

Read the full blog here to explore how consolidators can overcome these challenges and adapt to the evolving advice market.