A shrinking pool of Baby Boomers combined with increased online engagement is set to markedly reduce the demand for financial adviser services in the UK, new research reveals.

Today, less than one in 20 (4.1%) British adults are classified as extremely tech-savvy, but this is projected to increase to one in five (20.4%) by 2023 and to more than four in 10 (44.9%) by 2033.

While inter-generational differences in adviser use are partly explained by the fact that younger people have smaller investment portfolios and less urgency to plan for retirement, the research reveals a clear and significant positive trend in the use of the Internet to research, purchase and manage financial products across different age groups of British consumers.

A unit increase in the Tech Savviness scale will result in a 24.3% increase in the odds that an investor has never used an adviser over having a dedicated adviser.

Record numbers of people reaching retirement and starting the drawdown phase will likewise place downward pressure on the demand for financial advice.

This upsurge is even more marked in absolute terms, as the number of adults over the age of 65 is set to increase by a staggering 52.5% by 2035 relative to 2010.

The proportion of those over the age of 65 who use a financial adviser either on a sporadic or a dedicated basis is set to drop significantly in the next 20 years.

While 61.1% of households in this age group use an adviser today, only 51.3% will use one by 2023 and 39.5% will do so by 2033.

A shrinking client base in the advisory space will translate into falling industry revenue from client fees, although this can possibly be offset by income from ‘percentage of assets,’ if one presumes average asset levels will rise over the next 20+ years.

By 2018, total revenue from fees will decrease 3.45% to £1.77 billion. If the number of advisers remains constant, the number of clients per adviser will drop to 165 and average fees to £88,442.

Three quarters (75.3%) of 18-30-year-olds are classified as financially Tech Savvy, compared to less than half (48%) of those over the age of 70.

Similarly, only one in a thousand (0.1%) of those over the age of 70 is rated Extremely Tech Savvy, in contrast with one in 10 (9.3%) of those between the ages of 31 and 40.

An Extremely Tech Savvy consumer (with a score of 4 on the 0-4 scale) will have odds of 138% or higher of never having used an adviser over having a dedicated adviser, than a non-tech-savvy consumer.

There are 1.75 million households with a dedicated financial adviser in 2013, a 16.7% fall from 2.1 million households in 2011.

This fall primarily stems from the introduction of the Retail Distribution Review (RDR) which unfortunately has priced a significant number of households out of the market, or at least from the perspective of the cost advisers need to charge to offer on-going advice.

Estimated total industry adviser fees in 2013 equate to £1.83 billion per year, with an average adviser serving approximately 174 clients and managing assets of approximately £20 million, resulting in advice fees totalling £91,599 per adviser per year – or 0.46% p.a. of assets managed (excluding trail commission/legacy payments).