Forecasting the future: Just what will your business look like in five years’ time?

Financial Advisory

Financial Advisory


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Moderator: Roderic Rennison: Rennison Consulting Ltd

Expert: Joe Parkin (Blackrock iShares)


Lower returns and higher volatility are making it harder for investors to achieve their goals and are putting significant pressure on asset managers. As a consequence, in assessing forward looking expectations, innovation is key when constructing portfolios. 2016 has seen cash funds not selling, the risk of negative territory, a continuing rise in regulation, and in fiduciary costs, as well as the introduction of mini bonds

Increased regulation of wealth management globally aims to increase fiduciary standards, improve transparency, and ensure alignment of interests. Specifically:

  •  Assets are shifting to fee-based models, managed solution, and to passive from active.
  • Distributors are changing their business models to develop broader wealth value propositions which as re-energised captive managers and asset allocation and has reduced Asset Management Partners.
  • The lower end of the market is getting squeezed; as a consequence, there is less advice for small clients and an increased focus on digital solutions.

The impact on products has resulted in a shift away from “core active” to:

  • Speciality active – which includes multi-asset, retail alternatives, and all active fixed income and equity products
  • ETFs/Index funds.

Post RDR, a widespread advice gap has developed in the UK. Specifically:

  • 5.4 million people would be willing to pay for advice if it cost less
  • 10 million people think that they would benefit from free advice but are not aware of public financial guidance.
  • 14.5 million people think that they would benefit from free advice but haven’t taken any in the last two years
  •  23 million people have needed, but not taken preventative advice at least once in their life.

Technology is re-engineering distribution. The lessons from innovators are:

  • What can be automated, will be
  • Price compression is taking place
  • Consumer experience is being re-designed
  • Brands matter
  • There is an increasing pie
  • There are leapfrog opportunities

Business models need to adapt as the world is changing. In the old word, the traditional process was that the adviser would provide the advice required via face to face meetings or the telephone.

In the new world, there has been an evolution of the model and a degree of automation:

  • The hybrid (human plus digital (robo) capability) offering provides efficient online access and access to human one-off advice when required.
  • The fully digital service automatically recommends or provides guidance on investment products.

The opportunity is not just for “Robos”. Many clients of all generations will want a digital experience. The question is, with whom? Factors that will differentiate the “winners” from “losers” include:

  • Scale
  • Capital
  • Brand
  • Tolerance for regulation
  • Technological agility

Watch for “attackers” amongst branded financial institutions


  1. The generation with the money to invest is the middle-aged (50 years old) because they have built up money over the years plus inheritance from their aging parents
  2. Millennials don’t have a lot of money to invest nor do “HENRY”s – High Earner Not Rich Yet
  3. Average age to inherit money? 50 years old
  4. Digital/robo advice is not a threat to most intermediaries (yet) as demand for advice exceeds supply.
  5. However, over time, advisers may become more like coaches, becoming a source of reference, and undertaking cash-flow analysis and (some) clients will arrange their own investments/products.
  6. Competition generally is not an issue but are advisers making enough effort to reach and communicate with their clients?
  7. Clients are not yet generally questioning fees but will they over time want more value for their money? Intermediaries need to give thought to what may happen over time and plan accordingly.