Advisers need to change their business models to attract younger clients, a new industry research paper from AKG shows.
According to the paper NextGen or LostGen – The need to develop new client acquisition strategies, 91% of advisers recognise the need to develop different types of service and fee models in order to work with different age groups and segments.
However, around half (50%) of advisers cited the cost of living crisis as the biggest barrier to change, while 49% pointed to the impact of cost margins on their firm and 47% stated regulation. Developing new service/fee models to accommodate new clients and the length of time needed to make new clients profitable were also cited as challenges in acquiring new clients.
Matt Ward, communications director at AKG, said: “Although some firms may be comfortable with their focus on servicing existing clients, over the longer term those aware of the requirement to future-proof their client base and the value of their business will recognise the need to develop new client acquisition strategies. This will not necessarily be easy, and the situation is exacerbated currently by client wherewithal in the cost-of-living crisis and the perceived cost and regulatory issues facing advice firms.
“Whilst expanding footprint via relationship development with wider family units will play a key role, firms will need to get creative with their targeting, acquisition, and servicing strategies for the next generation of clients. This will inevitably require digital/technological support to create cost and process efficiencies but will also need a deeper understanding of future client requirements.”
The paper, which is sponsored by Fluido and Schroders, shows that 16% of advisers believe they will need to develop digital servicing capability/ functionality and 35% will need to add a more transactional service/fee model. In addition, 14% said they will need to add a charging model to attract families and 26% will need to develop both digital servicing and new charging models.
Duncan Muir, global industry lead – financial services at Fluido, commented: “The opportunity to adopt modern and innovative technology is here today, however, many aren’t aware or don’t have the roles in their business to define a route forward. There is too much reliance on providers developing new capabilities however there are too many conflicting demands on their table.
“Utilising technology to pick up the routine tasks and support front end elements of the advice process can reduce the cost to serve, manual intervention and enhance the experience of both user and client. All of these capabilities are accessible now and create the opportunity to increase capacity, reduce operating costs whilst not diminishing the invaluable services offered by advisers and meet the future expectations of clients in how they interact with their finances.”
The findings also highlight concern amongst consumers about the rising cost of living. Two fifths (41%) said they were worried about the impact of higher prices and inflation on their lifestyle and finances and 23% were concerned about their finances/ money matters in general.
Despite this, consumers recognise the need to save, particularly to cover emergency costs and bills. The most obvious options were high interest savings accounts, cash ISAs and a bank/building society.
Gillian Hepburn, head of UK intermediary solutions at Schroders, added: “The low level of interest in investing as opposed to holding cash is a concern. Despite increasing interest rates, we also continue to live with rising inflation and there needs to be a greater understanding of the impact of this on savings.
“The regulator identified that some people are at risk of harm by holding high levels of cash and as an industry we therefore need to communicate the benefits of investing whilst understanding the range of products available and the relationship between risk and reward.”
