The report, Examining Today’s Financial Advisory Business: Investment Approaches and Current Practice, surveyed the investment approaches of 161 financial advisors in the UK, and found that 60 per cent of them said they were focusing more of their efforts on financial planning than investment selection, with 30 per cent focusing almost solely on the former. This represents a 9 per cent shift towards financial planning since the prior survey was done in 2008.

The report shows that while around a quarter of advisors say they have a balanced-focus model, only 13 per cent focus more on investment selection. It also shows that it is larger firms which have embraced the planning approach the most: 40 per cent of advisors from firms with at least five advisors reported an almost exclusive focus on it, compared to 19 per cent of those at solo practices.

The Retail Distribution Review could be driving these changes, the firms said, as the proportion of revenue generated from fees was positively correlated with the focus on planning; advisors focused on financial planning stated they earned on average 57 per cent of their revenue from fees, compared to 47 per cent for those with a balanced focus and 45 per cent for those whose focus is on investment selection. The RDR is a programme by the Financial Services Authority, the UK regulator, under which advisors are being forced to upgrade their qualifications. The programme is designed, the FSA says, to raise the professionalism of financial advice. 

Unsurprisingly given the financial crisis, the study found clients were willing to spend more time talking about their investments and were more conservative.

However on the positive side, after much discussion about the issues of client confidence in recent months, just over half of advisors said that client trust in them has increased and 15 per cent said it has increased a great deal. This could be due to advisors putting in more time and effort into communication with clients, with 19 per cent of advisors reporting an increase in communication.

“That up to half of advisors have been able to increase client trust is a testament to their training and professionalism, and the increase in the number of advisors turning their models to financial planning indicates a positive future for the profession,” said Nick Cann, chief executive of the Institute of Financial Planning.