There are several reasons why the future looks rosy for financial advice.
A recovering economy, up to 10m new auto-enrolled investors and the recent liberalisation of the retirement market should all combine to present a great opportunity for guiding a new generation of savers.
At the same time, a steady erosion of both means-tested state benefits and defined-benefit pensions is gradually making it clear that responsibility for all our financial futures lies firmly with the individual.
The potential for financial advice to help, therefore, is obvious, but how this potential translates for financial advisers is less so.
Consumer research has repeatedly shown that investors value the personal relationship with a financial adviser. Unfortunately, the RDR has also revealed that a very significant proportion of investors are reluctant to pay the full economic cost of the service.
It seems likely, therefore, that a new technology-savvy generation will be more inclined to turn to the internet for guidance, and there are plenty of new D2C platforms springing up to look after them.
So is there anything advisers (and their platforms) can do to attract a profitable share of the new wave of wealth accumulators? The answer could lie in ‘big data’.
A significant proportion of the cost in delivering face-to-face advice lies in the fact-find and ‘know your customer’ stages.
Obviously these are essential building blocks of any financial plan, but to the client it can look like expensive form-filling.
Technology and ‘big data’ has the potential to address this. Google is the best known of the innovators in this space and is already moving beyond answering our questions to making proactive suggestions (with Google Now) based on its huge store of information about us.
Online retailers such as Amazon and eBay have been telling us what we like for some time. Now some less well-known firms, such as Rocketer, are analysing our social media footprint to build incredibly accurate profiles of what we are like.
Advisers (and thus their investment platforms) will need to embrace this kind of technology in the near future if they want to be relevant to a new wave of Generation Y savers.
As well as drastically reducing the time (and cost) required to build a financial plan, the smart use of big data will enable an adviser to get to the part consumers value much faster and to look smarter in the process.
Just now this may seem a long way off. Several current platforms cannot even manage two-way integration with an adviser’s own back-office systems let alone connect to the rich matrix of data which exists about consumers in the wider digital community.
But, if advisers and their platforms fail to embrace the opportunity to know their clients in a whole new way, then one thing is certain – somebody else will.
Kevin Okell is director at Altus
