Changing face of financial advice
A deep, unique global crisis and ensuing financial turmoil have raised the profile and virtues of proper financial planning, as well as the need for accessible technology to serve a broadening demographic seeking advice
The coronavirus pandemic has accelerated transformation of the financial advice landscape. While many have struggled financially, others are better off and the demographic variation is clear. Young people have been twice as likely to lose their jobs during the crisis, according to research from the London School of Economics, while a Financial Conduct Authority (FCA) study found 14 per cent of adults, mainly in older groups, have seen an improvement in their financial situation, due to low activity and spending through the lockdowns.
The drastic difference in experiences is reshaping the provision of financial advice. Historically the preserve of older, wealthier individuals, a recent report by Prudential discovered the need for financial advice is now felt strongest among younger generations, with 74 per cent of millennials saying they had or were going to see an adviser. That’s not to say demand from more mature generations has diminished. For many, the pandemic has brought mortality into focus, leaving them wondering if they can retire earlier or what they need to do to ensure their family are supported.
“We have seen an increase in the number of first-time investors, particularly in the over-50 age group, with more disposable income or savings,” says Ian Balgarnie, commercial director at Ascot Lloyd, one of the UK’s leading national firms of independent financial advisers. “We have found that the older generation, who’ve already accumulated wealth, now have more options as a result of reduced spending during the pandemic. However, demands from family may have increased and others are reconsidering their future as a result of what’s happened.
“As millennials are increasingly aware of the importance of their savings and being introduced to investing, it is no longer just the mature individual we need to serve. The pandemic has seen people’s attitudes and behaviours change and wealth distribution between generations shift, more rapidly than was anticipated. Advisers that are adapting their client approach and innovating their service are succeeding in building stronger, more robust businesses that give clients assurance and continuity.”
The demographic shift, along with the necessity of continuing to serve clients during the pandemic, has accelerated the use of technology in the financial advice industry. As a profession built on developing strong interpersonal relationships via face-to-face meetings, often in people’s homes, advisers quickly needed to find other ways to speak to clients while maintaining trust. Older generations, both on the client and adviser side, have been propelled into using video platforms like Zoom and Microsoft Teams, which have been crucial to continuing communication during a stressful period.
Short-term market volatility raised concern for many investors, who sought advice and guidance from experts. Often just reassurance was needed and given that doing nothing when markets were plunging was the safest option. While its independent financial advisers (IFAs) have engaged regularly with clients via phone, video and email, Ascot Lloyd has also shared additional insights and expertise through regular e-news bulletins, video blogs, podcasts and webinars. High levels of digital client engagement have shown this is very much the new normal.
“The feedback we’ve had is that meetings have been more succinct and focused, which has allowed advisers to do more of them,” says Balgarnie. “Technology won’t replace IFAs, but it will replace IFAs who don’t engage with technology. This can only be a good thing, enabling us to adapt and improve the client experience as consumer demands continue to evolve. A trusted adviser relationship with clients is crucial and this won’t change; it’s just that technology is becoming more of an enabler.
“It’s not only about video conferencing, either. When a lot of people look for a financial adviser now, they want to see if you can do valuations and cash-flow modelling online and if they can look at their portfolio on their mobile device. They do their research online too through customer review sites like VouchedFor. The emphasis will move away from just focusing on the portfolio valuation to, am I on track to hit my financial goals? It enables deeper planning, as opposed to just product purchase.”
The client experience also extends to more administrative tasks, which through automation can free up the time of advisers to focus on their core task, providing financial advice and thereby facilitating a more sustainable business model. Ascot Lloyd has introduced an e-signature solution, for instance, to speed up the client onboarding process, and automated the processes involved in preparing and reviewing documents. Advisers now have a broader range of clients using the various tools available.
Crucially, technology is helping close the advice gap, which widened in 2012 when the introduction of the Retail Distribution Review by the FCA banned advisers from taking commission and forced them to charge upfront fees instead. While the total cost of financial advice has remained broadly the same, the changing pricing model has left millions of people who want financial advice feeling they can’t afford it. By embracing technology, financial advice firms can address higher numbers more easily and advisers can take on more clients while still maintaining their valued and trusted relationships.
“The financial advice industry is transforming by creating the potential for faster and more flexible links, which could ultimately improve services, change pricing models and make advice more accessible to a wider group of investors,” says Balgarnie. “It has created opportunities for those able to adapt quickly and will determine the winners and losers in the future. Compared to other industries, financial services has been relatively slow in adopting technology, however consumer expectations and experiences of technology in other aspects of their lives is accelerating progress.
“Advisers should continue to adapt and understand the demand for technology that is expected from younger generations who want to engage in different ways. As the use of technology becomes evermore intrinsic to everything they do in life, it’s understandable this would creep into their expectations when engaging with financial advice too.
inancial advice is not a one size fits all and the introduction of a digitally enabled approach is exciting as it will provide a sensible route for the younger generation and less wealthy clients to engage with saving and financial planning early on and provide much more choice.”
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