Future of Advice - Beneath and Beyond

Financial Advisory

17 September 2020

Advisory DistributorsClientCOVIDCustomerFinancial AdvisoryFinancial servicesTechnology

Future of Advice - Beneath and Beyond

Expert:             Matt Ward, Communications Director, AKG
Facilitator:       Don Wild, Wild Ochre Consulting 

The State of Play

  • Just a few weeks ago a number of leading practitioners, thinkers and commentators in advisory distribution came together at two Future of Advice themed Meeting of Minds Roundtable Sessions to chew over some of the key themes emerging from AKG's recently published research paper (in conjunction with its sponsors: Canada Life; Charles Stanley; Fidelity FundsNetwork; Intelliflo)
  • By way of summary we would like to share with you here some of the key issues and questions arising from these discussions, many of which we believe deserve greater attention.....and in some cases require further action!
  • Starting with clients and potential new clients. The research indicated that perceived costs, lack of trust (not wanting to be sold to) and lack of engagement (poor communication?) were key reasons why more people are not currently accessing financial advice. This is in stark contrast to the practitioners, who enjoyed great trust and whose clients greatly valued the advice provided. As much as anything the ‘gap’ is a ‘perception’ amongst the general public, influenced by negative press comment and poor previous experiences. Agreed that the industry can and must do more to promote good news stories and better communicate the benefits of advice.
  • The current market need is heavily predominated by the Baby Boomers and no doubt the servicing of this type of client, through their retirement and later lives, will see many of the ‘mature’ advice firms through to their own retirements. However, the issue of intergenerational planning is growing in importance, suggesting that just focusing on Baby Boomers not only misses the opportunity to obtain more clients but potentially introduces the risk that the next generation will form new and more technologically driven financial planning/services engagement. Agreed that further development of intergenerational tactics/techniques when seeking to engage with family units is required in what is a very personal/emotional area.
  • Some recent launches in the market suggest there is now a concerted effort to use a combination of technology and virtual meetings in order to provide advice in a less complex and lower cost format. The impact of the pandemic is such that it has forced all practitioners to engage with clients on a virtual basis. What will the balance of face-to-face and virtual servicing look like moving forward? How will this affect pricing models? Will we see Robo 2.0 propositions post-COVID following initially lukewarm responses to opening Robo salvos. Will financial planning be able to launch trickle-down tech-based services?
  • A key challenge question therefore for future discussions on this theme is: ‘Will many advice firms be just spectators? And how many will be able to implement a multi-generational strategy with a range of service layers?
  • Discussion also took place on current and future M&A activity, which is predicted to continue in spite of, or in fact because of the recent volatility. The challenge question here was to give deeper consideration to associated client benefit from these deals, i.e. are clients and future clients going to be any better off or better served as a result of M&A?
  • The argument could be that a larger Advisory group will have more stability and hence be able to offer wider services and potentially invest in new technology. Also, will scale enable larger groups to create cost-efficiencies for clients?
  • To date there appears to have been many ‘false dawns’ but investors in the market remain, including private equity, appear undeterred and the activity continues apace. The logic does dictate that essentially this ‘trial and error' approach will ultimately produce some real success stories. A combination of technology, a trusted brand, quality people and efficient pricing should eventually win through. In such a market, third party and authentic client endorsements will play a bigger role
  • Clearly in the current market, and with the very real prospect of a ‘Second Wave‘ of COVID-19, the research verifies the move to video and remote technology. As a group it was clear that there is now a permanent change for advice businesses in terms of moving to a ‘hybrid’ solution whereby meetings could be physical or virtual. The profession has advanced its video and technology capability more in a few months than in the previous few years. And so a question hangs in the air around future skillsets: ‘Will IT graduates be of greater value to smaller advice firms than actual Financial Planners?'
  • Opportunity exists for future-focussed, more flexible servicing models, which acknowledge and understand the different behaviours and values of the different client demographics and the different client types within these demographics. In particular the current focus on behavioural sciences could prove to be one of the more lasting legacies for Financial Planning
  • Operating for much of the year to date (and to come) with COVID-19 lockdown (in its various forms) has essentially led to a more profitable year for Advice Businesses as they have managed to provide a ‘virtual service’ to their existing clients whilst reducing travel, hospitality and overall expenses. However, there may well be a 'sting in the tail’ as a continuation of some form of lockdown will make finding new clients more difficult until revised or new tactics and skills are obtained to facilitate new client acquisition for Financial Planning
  • Clear messaging to come through is that, whilst in the short-term business will continue as before (with the exception of virtual meetings), not to be prepared for a new more technology-driven age using ‘easy to use technology’, smart algorithms, keenly priced and with a personal touch, could well put the medium and long-term future of the business at risk.....and the prospect of a ‘well-financed’ exit, could be somewhat diminished.