Technology will change the adviser market in 2022

25 January 2022

New ways of working, driven and supported by technology, will see significant changes in the financial advice landscape, says Nick Eatock, CEO of intelliflo

The last two years have been challenging for the advice profession, to say the least. Firms have battled to operate as usual through periods of uncertainty and with massive restrictions on our normal way of doing things. The advisers and paraplanners we deal with have made huge efforts to adjust processes to continue to deliver a quality service to all clients. Technology has been at the heart of these new ways of working and I believe that this will continue as we move into 2022.

The growth of hybrid advice

There has been a great deal of talk in recent years about the rise of robo but claims of it overtaking traditional advice have so far proved unfounded. According to the FCA’s Evaluation of the impact of the Retail Distribution Review and the Financial Advice Market Review, only 1.3% of UK adults used an automated online investment or pension service in 2020[1]. However, we predict that a legacy of the pandemic will be that offering a combination of human and automated advice becomes more commonplace.

The cost of delivering advice has been rising for some time, and while using technology to deliver business efficiencies and cut costs is not new, the pandemic has significantly accelerated the trend. Working from home forced advisers and paraplanners to use technology to effectively serve their clients from a distance. Improvements that were on the back burner suddenly became a priority as time-consuming paper-based processes and manual workarounds became impossible when working remotely.

At the same time, the crisis has made us all far more comfortable interacting online. According to the Lloyds Consumer Digital Index[2], 2021 saw a major uplift in digital activity, with people spending 11% more time online than in 2020, and the over 60s in particular become more digitally engaged. This new digital awareness has given people the opportunity to reconsider the type of services they want. Although many will still favour a holistic advice service with in-person meetings, some may prefer to continue online, especially if there’s a cost-saving. Boring Money found 40% of clients would move from traditional face-to-face advice to a virtual set-up if it meant they would pay a lower fee[3].

Covid has also impacted people’s finances, for both good and bad, with young adults particularly adversely affected. This may explain why younger people increasingly recognise the benefits of professional advice. OpenMoney’s advice gap research found that one in ten respondents who have not paid for advice in the last two years say they now plan to do so, but this rises to one in five among those aged 18 to 24[4].

However, this demographic is unlikely to have accumulated investible assets on a par with typical financial advice clients. They may also have simpler needs than older clients who are seeking help with retirement income or to protect intergenerational wealth. Delivering traditional full-service advice to this group may not be cost-effective for many advisers, yet there are clear long-term benefits of taking on younger clients – for both the advice business and the individual’s finances.

We think all these factors will drive more firms towards hybrid advice. A recent poll by The London Institute of Banking & Finance found that 91% are likely to adopt a hybrid advice model over the next three to five years[5]. But this is not the robo-advice we’ve seen previously. A hybrid approach helps to fill the gap between full hands-on advice and DIY investing. It is a strategic, flexible and complementary blend of digital and human advice, providing investors with regulated advice appropriate to their circumstances, while allowing advice firms to deliver a cost-effective service to a greater number of clients with different financial needs and at all stages of wealth accumulation.

An effective hybrid strategy requires modern, cloud-based technology that automates administrative tasks, freeing advisers and paraplanners for more high-value activities. We expect to see an increase in migrations from traditional bespoke software solutions to an end-to-end, single platform that supports the whole advice lifecycle from the initial digital fact find to the investment strategy and ongoing suitability reporting. Using technology to best effect can enhance efficiency, reduce costs and allow advisers to effectively serve a broader range of client segments while maintaining their fee levels.

The rise in cashflow-based planning

Another consequence of the pandemic is lasting changes to the way we work. The flexibility of remote working has allowed some people to move from traditional 9 to 5 jobs to find a better work/life balance, while redundancy and furlough have led to a surge in people switching to gig work or turning to ‘side hustles’ to supplement or replace their primary income.

Financial advice models and strategies must adapt to reflect these changes in working practices with variable and diverse sources of income. We expect that advice professionals will move away from generic retirement-based planning in favour of cashflow-based planning models that help clients understand their income requirements at all stages of their lives and the need to protect their finances against uncertainty and instability.

To support this shift, we see future investments in modern cashflow planning technologies that can incorporate all scenarios into a single, dynamic financial roadmap. Advisers and paraplanners will adopt cashflow planning technologies that can aggregate various data to deliver effective planning options and drive the client’s engagement with their long-term financial plan.

Cultural shifts, technological advances and consumer preferences are changing the financial advice experience. Increasingly clients expect to choose when and how they meet their adviser – digitally, in-person or a mix of both. And firms will increasingly need to work more efficiently to deliver a consistent quality service to more clients with fewer resources.

As a result of these pressures, 2022 will be a year for digital transformation, with firms streamlining and optimising processes, while serving a broader range of clients. The next year has the potential for substantial progress to be made in widening access to financial advice, which has never been more important.






Professional Paraplanner