Changing face of financial 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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Pro­mot­ed by Ascot Lloyd