Financial Advisory

Financial Advisory


Expert: Sandra Carlisle, HSBC Global Asset Management

Facilitator: Edward Wess, KPMG

The expert shared perspectives on some tectonic shifts in the wealth management marketplace:

  • Massive wealth transfer to the next generation:
    • Intergenerational wealth transfer in the next 20 years will be the biggest in history
      • Also includes small business owners handing over the reins
    • Millennials could drive $15-20trn in inflows over the next 20-30 years
  • These new wealth owners will have different investment priorities:
    • 87% of millennials believe that business success should be measured by more than just financial performance
    • Two thirds of UK millennials believe that values-based investing delivers the same or better financial returns
  • Catering to these new priorities can deliver attractive financial returns:
    • Environmental, social and governmental themes can both benefit society and the bottom line
    • Themes discussed by the group included:
      • Renewables are now cost-competitive; should you be investing in Chevron or JinkoSolar?
      • Battery technology has come on leaps and bounds – Tesla has its Gigafactory; BMW expects to develop breakthrough battery technology by 2026
      • Electric cars are the future of the auto industry
        • Speaking of Tesla…
      • And speaking of electric vehicles, governmental factors will continue to shape markets – what investment opportunities are created by the UK’s commitment to ban the sale of all new diesel and petrol cars by 2040?

Participants discussed three further themes:

How ESG factors impacted participants’ approach to investment and advice

  • Factors of interest were the infrastructure changes that might come about from the rise of electric vehicles
    • When will we see electric charge points in petrol station forecourts? What does this mean for E&P firms like BP, who play in both upstream and downstream energy sectors?
    • What about the increase in electricity use in the evenings when people plug their cars in? How will energy infrastructure cope? Who will be the winners and losers from this shift?
  • Advisers noted that the impact of ESG had not been felt materially in their businesses:
    • Need more track record on how ESG impacts financial returns - “I still need to answer to my Investment Committee”
    • Not a lot of clients had asked participants about ESG factors; some advisers noted that they would be less willing to work with clients who asked them to avoid certain groups of stocks on ethical grounds (tobacco, defence, etc.)

How do we access the clients of the future?

  • General consensus was that waiting for intergenerational wealth transfer would leave things too late. Average age of client at one firm was 56, which was in line with most firms present.
  • Participants discussed strategies for attracting younger clients:
    • Paying dividends now: lower-cost advice propositions geared at the children of existing clients
      • One adviser had seen good take-up of a low-cost advice proposition to any clients’ child with income and wealth below certain thresholds
    • Laying the groundwork for the future: financial education programmes for the children of clients
      • One participant talked about a programme he had set up, whereby his firm held seminars with clients’ children on ‘finances 101,’ covering things like debt, budgeting, and investment
      • Programme was very well-received by clients and children
      • Certainly a bet for the future – children participating were as young as 11-16!

How do we attract the advisers of the future?

  • If average age of client is trending upwards, that also holds true for advisers themselves
  • A popular theme in the room was building up capabilities amongst analysts and paraplanners, often at the expense of investing in more advisers / consultants
    • One participant noted that his firm had halved its number of consultants and doubled number of support staff
  • Participants noted a number of benefits from upskilling analysts and paraplanners:
    • Cost savings of rebalance towards ‘support staff’
    • Widening number of clients’ contacts meant more touchpoints for the client to work with
      • Also means that the client relationship is also more clearly owned by the firm than adviser
      • Some advisers said they had seen a clear uplift in client retention after making the change
    • Participants also saw material benefits to employee retention – staff felt more invested in client relationships and the business, and more valued due to increased investment in training
      • Part of this was showing a more varied career progression to staff members – you don’t need to do one thing
      • ‘Doing the right thing’ isn’t just an investment thesis but a way to run an advice business
        • Increased training is an investment in your people and the right thing to do
        • One adviser noted a very successful deployment of a bonus pool for all staff – going beyond the minimum required was important to him
          • Also had benefits to the business – not one employee had left in the 2 years since introducing a bonus pool