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Challenges lie ahead

The best-managed and financially sound organisations tend to be those that can demonstrate not only that they possess a considered and deliverable client proposition, but also have the ability to maintain their ongoing relationships while attracting new business.

Long-standing firms are the ones that manage to build on that success, adapting to changing market trends and fulfilling the needs of a new generation of clients.

In recent years there has been much shaking of heads about the scope for the financial advisory sector. People have bemoaned the fact that, with rare exception, the average age of those providing advice is somewhere over 50. Interestingly one of the by-products of RDR seems to have been a recent ‘re-energising’ of recruitment into the sector. Pleasingly the number of young people leaving further education and actively looking for careers in financial advice is growing. It is no small irony that they are to a large extent attracted by the very examinations – which they closely associate with the term ‘professional’ – that have served as such a deterrent to a few of the ‘old school’ who have questioned their relevance, particularly to themselves.

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But what of the advisory client base in the future? Existing clients, albeit on average living longer, are fast maturing, and for many firms this presents no small risk. This is one area in which service excellence counts for little as estates are divided among siblings, frequently with very different priorities. The income stream generated by older clients, although undeniably welcome, can often heavily skew the balance of advisory businesses as it represents a disproportionate element of overall revenue. Where are the younger clients and the new business going to come from?

In this instance the head-shakers rue the fact that for most young people spending on credit rather than saving and investing remains the order of the day, and this is scarcely surprising when most have watched their parents and learned that living with debt is a perfectly normal state of affairs. Therefore the announcement earlier in the year that personal financial education will be included in mathematics and citizenship in the new national school curriculum is to be commended. Children are to be provided with ‘the skills and knowledge to manage their money well and make sound financial decisions’.

Between the ages of 11 and 14, the course content will focus on the functions and uses of money, the importance of personal budgeting, money management and basic financial products and services. It will then move on between the ages of 14 and 16 to more sophisticated products and services, wages, taxes, credit, debt and financial risk. Whether this will equip pupils to sidestep the worst aspects of debt – payday loans being a case in point – only time will tell. But will they be encouraged to save? And now that independent financial advice has shifted to a wholly fee-based framework, will they be willing to pay for it?

Research undertaken by Andrew Clare of Cass Business School in association with Fidelity published in January was revealing. The answer to the question: apparently not, at least not in great quantities. Extrapolating from a representative sample of 2060 UK adults, the findings indicated that just more than 14 per cent of the population – some 7m people – were likely to be willing to pay a fee for advice. Yet of the 43m that fall into what Mr Clare described as the ‘guidance gap’, the category of those unwilling or unable to access financial advice, it is estimated that their current annual saving amounts to the princely sum of £54bn.