Advisers need to switch from transactional to relationship models if they are to survive the test of time and save the country from a growing advice gap, Natalie McLellan has warned.
The financial services practice head at Egremont said she was concerned about the status quo but took heart from FCA head Martin Wheatley’s speech at the end of May in which he challenged firms to innovate.
In a time when financial advisers “fear” innovative practices because of potential regulatory reprisals, she urged the profession to change its approach and take the FCA up on its latest invitation to change.
She said the “tick-box compliance approach” had “not served anyone well” and advisers keen to remain relevant in the digital age must seek to replicate retail companies for their responsive service development and cross-channel execution methods.
She added: “The industry is crying out for a rethink of its strategy. The old model is a very crowded space.
“[Advisers] are all after high net worth clients, whereas what they need to do is innovate and leverage digital technology – to come up with a way to deliver guidance, not just full-blown financial advice.”
Ms McLellan said the Retail Distribution Review and the digitalisation of technology had transformed the role of the intermediary and forced advisers to go “massively upmarket”.
These industry changes, coupled with increasing regulation following numerous mis-selling scandals, made advisers focus solely on premium face-to-face advice, which she warned was a dwindling need that needed readdressing.
She added: “[Advisers] need to start by understanding customers and their needs. Some clients will have complex needs where only full financial advice is sufficient, but that is a very small proportion of the population.
“A big chunk is in the middle and the bold and new entrants will see new opportunities there.”
Rather than changing gradually to address changing demographics, those wanting to succeed must “change quicker than before” or risk becoming obsolete, Ms McLellan warned.
She said one of the problems with financial services was the length of time it took to make changes, but the urgency of the situation and the FCA’s acceptance that an issue existed could help to push through the necessary changes before it was too late.
Ms McLellan added: “There is a strong commercial opportunity to provide technology-based guidance that can be shaped around the customer. Either you go with it or get out of the business.”
Adviser view
Neil Sadler, chartered financial planner at London-based LIFT-Financial, said: “There probably are opportunities in the simplified advice market, but I doubt that a failure to widen appeal will make a great deal of difference to a firm’s chances of success or failure. The best firms in terms of standards, staff and business principles will attract clients willing to pay a profitable fee – as is the case in any profession.”
