News & Views

What are we and where do we go from here? A report on the future of advice

Panacea report for Financial Advisers and Paraplanners

9 Aug 2019

What are we and where do we go from here? A report on the future of advice

With so many regulatory changes being made, more to come, along with the rise of new technologies and Baby Boomers continuing to age, it seems that we are looking at a number of disruptions to the status quo.

We therefore asked advisers and advice industry leaders to share their insights and opinions on what the future holds for the future of advice, what the advisers of today should we be concerned with and what success looks like in the future.

Thank you to all of the individuals that took part in this and we hope our readers get some useful takeaways from it.

What do you predict to be the main differences in the advice space in five years from now?

A lot of the responses to this question focused on technological developments with many advisers including David Stamp from ABS Ltdbelieving that advancement of technology will increase client access to financial advice.

Simon Pettitt, Consultant at DBB Consultingadded “There will be less qualified people offering specific investment advice and more low-cost, commoditised advice to a banded selection of investors, probably via a platform, AI or robo-advice. DFMs will benefit more from this.” 

Compliance was also a factor in responses to the future of advice space, with 

Mark Curtis, Compliance & Operations Manager at Apogee Wealth Management predicting that there will be a ban on contingency charging.

Michael O’Donnell, Compliance, worries that there will be too much regulatory requirement on smaller firms – a view that was also shared by many in this survey.  

Others, such asHarish Patel from IDS Financial Servicescan also envisage banks moving back into the advice space to meet demand.  

That is already happening with some including Schroders Personal Wealth and Bank of Scotland.

Philip Moore, Business Consultant in the Adviser market for Action Consulting (UK) Ltdfeels that firms will need to specialise in specific client markets, providing a style, or level of advice most appropriate to that market. Some advisers will have to focus on non-HMW and provide a lighter style of advice to achieve an affordable level of advice costs

Whilst Ronnie Taylor, Chief Distribution Officer at Aegonfeels that advice will be more important than ever but it will be delivered more efficiently and through different media in many cases.

What do you expect to be the biggest opportunities for a financial adviser and why?

Again, improvements in technology were a focus of the biggest opportunities, with many expecting increased capacity due to technological improvements. 

Caroline Bradley from the Tenet Groupagrees that going forward, through technological improvements advisers will have the ability to service clients in a more efficient way as well as service smaller client that may otherwise have been turned away. Additionally, she can see more opportunities for Paraplanners and Admin support managing more relationships.

But there are other opportunities to be sought, with Philip Moore, Business Consultant in the Adviser market for Action Consulting (UK) Ltdbelieving that advisers need to look at developing a far more engaging client proposition than is common now. This needs to be one that combines goal-oriented advice with on-line interactivity and heavy visual elements to all stages of the advice process - and one that either eliminates the complexities of advice or at least hides them from the client.

It is also important that advisers take on board younger clients and nurture and develop them into becoming major clients in the future believes Callum Evans from Structured Financial Planning.  

A view shared by many, includingTim Morris from Russell & Co Financial Advisers andFinancial Adviser, Tony Taylor whoboth see inherited wealth as an opportunity for the future with over 65s passing wealth to their children who have no experience of investment and inclined to spend it on rather than invest it.

Keith Scott from Albert E Sharp Investment Management & Stockbrokingsimilarly stated that he believes that the biggest opportunity lies in more over 50s looking to retire earlier.

This view is continued by Ronnie Taylor, Chief Distribution Officer at Aegonwho says “Too many to mention! The explosion in Workplace savings, lack of life cover across the UK and looking after the first generation of pension retirees are just three!” 

What do you expect to be the biggest threats for a financial adviser and why?

Once again, a pattern emerged from answers here. Advisers view technology as a threat as well as an opportunity, particularly when looking at younger clients and the advent of more simple self-service online tools particularly in the mortgage and protection space and through DIY investments tools. 

AsPhilip Moore, Business Consultant in the Adviser market for Action Consulting (UK)Ltdpointed out “Clients increasingly want a more digital experience and not finding advisers who can provide that.” 

Andrew, a Private Client Investment Manager from Herbertsbelieves that complacency over the amount clients will pay for face-to-face service. David Stone, Financial Adviser from Mansion House Capital agrees that fee compression will be due to technology and transparency. 

Chris Fox, Financial Adviser at Emery IFA Limitedsaid “Costs, product margins and compliance initially, (due to greater levels of competition and greater consumer protection) followed by potential loss of clients once my existing clients pass away. As the millennials (who are esg/ethical believers) are not currently served very well by my existing ESG proposition.”

There will also be increasingly lower risk-free returns on products. IFAs will struggle to find decent risk/reward products that offer growth to client portfolios warns Simon Pettitt, Consultant at DBB Consulting

Regulation is also a concern, with Michael O’Donnell, Complianceworrying about the impact of regulation, believing that it needs to be paired back, products should be regulated this would mean they were all deemed fit for purpose. Less regulation of advisers small firms will reduce cost increase competition.

Ronnie Taylor, Chief Distribution Officer at Aegonbelieves that continued regulatory change and limited real support from product providers demonstrates the biggest potential threats for financial advisers.  

Mark Curtis, Compliance & Operations Manager at Apogee Wealth Management thinks that the removal of RDR based fees and higher business cost in meeting the MiFid requirements will pose as the biggest threats for advisers.

What advice would you offer a financial adviser who is just getting started?

A number of respondents such asChris Fox, Emery IFA Limited, Tony Taylor, Financial Adviser andMark Curtis, Compliance & Operations Manager at Apogee Wealth Managementall agree that getting well qualified is key, with Mark Curtis saying “Chartered qualifications are important to set you ahead of the field and get a good Mentor”

Callum Evans from Structured Financial Planningadded “Continue to Read and learn take every opportunity to develop your skills and knowledge. Use your ears and eyes not your mouth. Listen to clients and try to meet their expectations under promise and over provide, do not try and confuse client with your knowledge, use the old adage KISS (Keep it Simple Stupid). Develop your questioning skills away from an interrogation process, always make the client feel you are genuinely interested and don’t make promises that you cant keep. Be realistic with timescales and keep client informed at all stages when dealing with their case.”

Others suggest focusing on the kind of relationships you want to develop, Steve Rudd from Yorkshire Premier Financial Servicessuggests that new advisers need so focus on specific advice areas and developing long-term relationships. 

Ronnie Taylor, Chief Distribution Officer at Aegon agrees and suggests that new advisers should “Seek the views and counsel of those you know in the industry. You are walking on the shoulders of giants!”

Philip Moore, Business Consultant in the Adviser market for Action Consulting (UK) Ltdbelieves that future advisers need to think a lot about (1) what kind of client you wish to deal with (narrowing the target market is the future) and (2) what sort of experience will appeal to them. Then setting up every aspect of your business to provide that experience - become known for how you treat your clients. 

How do you believe the traditional advisory business compete with robo advisers?

Many of the responders believe that robo advice can work in harmony with the traditional advice process. 

Caroline Bradley at Tenetcan see the two working together suggesting that robo can service the smaller simple needs and there is a place for advice for the complex area such as IHT planning, trusts and lifetime allowance.

Advisers will also need to differentiate by age as well as product type, believes Steve Rudd from Yorkshire Premier Financial Serviceswith older clients still wanting face-to-face advice whereas younger clients will accept and be more willing to use robo advice.

David Stamp from ABS Ltd agrees as he points out that the traditional adviser can use similar technology to support their advice and be hands-on where necessary.

Philip Moore, Business Consultant in the Adviser market for Action Consulting (UK)Ltdfeels that traditional business doesn’t compete but Advisers will have to recognise that some clients will prefer an all-digital advice process. However most clients want a personal service but that service must utilise digital tools and technology to reduce the costs and enhance the service. Clients in the future will not tolerate advisers who do not exploit technology to support and enable a personal and personalised service.

Andrew, a Private Client Investment Manager from Herbertsalso believes that Advisers need to embed robo advice into their processes, he states “Use it as an efficiency tool and think of it as a tool, not a threat.”

Ronnie Taylor, Chief Distribution Officer at Aegonbelieves that traditional advisory business will work alongside robo-advisers as the face to face element will always matter at “moments of truth” in people’s lives. 

Whilst many still believe that longer term Robo will not have the capacity to compete with face-to-face advice.  

Keith Scott from Albert E Sharp Investment Management & Stockbrokingsaid “Traditional will be the winner, as relationships are key, we have had a very good example, client left because of fees (not expensive .75%) but could get .33% with Nutmeg, but on the death of one of the clients, were not offered any face to face contact or support, 'all transactions' were by email, remaining partner spoke with previous partner here who has agreed to take him back on and sort it out...”

Simon Pettitt, Consultant at DBB Consultingagrees, “It will lose (on a cost basis). But the real advisory business is a different market from robo and anyway independent advisers have no business charging fees for basic and commoditised solutions to common investment approaches. The value-added needs to be the relationship management on a case-by-case basis to satisfy the individual clients' fees paid to the adviser. Here, robo cannot win.” 

What are your thoughts? Add any comments in the box below…

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