Rising interest in financial advice is promising for advice firms, but to take advantage of this ongoing trend, firms need to look beyond their current operational models, argues Elliot Daniels, Head of Compliance at Truly Independent.
Has there ever been a better time to be working in financial advice? This might sound like a frivolous question, but it reflects a reality that is rapidly becoming more apparent.
The fallout from the Autumn Budget has left millions of people concerned about the difficulties of building a secure financial future. Many of them may now be considering seeking financial advice for the first time.
Historically, the notion of professional financial advice has been anathema to a sizeable percentage of the population. Expert guidance has been perceived as too expensive or, irrespective of cost, simply of insufficient benefit.
This trend has been consistently fuelled by the well-intentioned but almost invariably suboptimal “assistance” proffered by family, friends and other self-declared founts of knowledge. The rise of social media has massively expanded the cast of purported sources of wisdom.
The long-peddled idea that individuals can reach their own informed financial decisions if equipped with the “right” information has only added to the fray. In my view, this narrative – often handed down from on high – has perpetuated the advice gap and done a disservice to many consumers.
Now, though, the Budget appears to have triggered a seismic shift. There is already evidence that the likely advantages of professional advice are earning much greater recognition.
One platform recently reported a 23% rise in enquiries in the days immediately after the Chancellor plunged much of the nation into a state of anger and confusion. There was a particularly big spike in the number of searches for pension-related articles.
Interestingly, the same organisation reported a few weeks earlier that just 2% of advisers had confidence in the UK’s economic policy agenda. It seems this lack of faith is now widely shared.
And this is why I dare to suggest there has never been a better time to be working in financial advice? Given all of the above, we could be forgiven for feeling optimistic and even excited.
Am I saying this because there are suddenly lots of lost souls out there? No. I am saying it because we now have a remarkable opportunity to demonstrate that our job, our purpose, our raison d’être, is to help improve as many lives as possible.
The end of the “one size fits all” age
To an extent, this new backdrop represents something of a double-edged sword. While demand for professional advice looks set to rise, it would be fair to say planning a client’s financial future might never have harder than it is now.
By way of illustration, let us assume one of an adviser’s most fundamental tasks is to encourage people to save on a regular basis for an extended period – say, around 40 years – so they have sufficient money in retirement. How do we do that?
Perhaps above all, it would be handy to possess a reasonable grasp of how the next 40 or so years might pan out. Since successive governments have delighted in repeatedly moving the goalposts, scenario mapping of this sort is becoming trickier.
Yet it could be argued that this only strengthens our standing. If it is tough for us to be crystal-clear about the way ahead then what chance does anyone else have? Ultimately, our experience and insight should be more valuable than ever in challenging times.
Of course, we still have to demonstrate that value – and the first hurdle in this regard, needless to say, is price. It may well be that millions of new would-be clients are keen to discover what we can do for them, but how do we avoid most of them turning tail as soon as they see our fees?
The knee-jerk solution: lower charges. It is a story we have all heard many times in the past. However, maybe even more so than before, I suspect the answer is not as straightforward – or as inherently controversial from the adviser community’s perspective – as that.
I believe the focus should instead be on moving away from outdated one-size-fits-all approaches. With the era of targeted support just around the corner, there is increasingly little to be said for centralised propositions.
As a compliance specialist, I fully appreciate how these models have come to dominate. Regulation has played a major role in shaping them. But there is now a growing risk of them making independent advice look more like restricted advice and professional recommendations look more like foregone conclusions.
This is why firms need to expand their offerings to genuinely accommodate different types of client. Going forward, they need to have the flexibility to satisfy the requirements and preferences of those who do not fit the accepted mould. Crucially, they also need to vary their fees in line with distinct levels of service.
Such steps could go a long way towards realising the elusive ideal of advice for everyone. Just as importantly, they could also go a long way towards safeguarding our industry’s own future in a financial environment defined by uncertainty, anxiety and bewilderment.
Main image: sebastian-herrmann-NbtIDoFKGO8-unsplash
