At this time of year I usually reflect on the past year and what the future year will hold for the advisory profession, but this year I am going to look at a longer timeframe as this will be my last column for this newspaper.
I have been writing for Financial Adviser for over 20 years, during which time the profession has seen monumental changes, including in the area of careers, education and professionalism.
For me the most significant change has been the journey towards greater professionalism. In 2000 I was privileged to lead the Society of Financial Advisers. For the benefit of newer readers, Sofa was one of the two leading advisory bodies (the other being the LIA) that eventually merged to create today’s Personal Finance Society.
In my year as chairman of Sofa I predicted a time when Sofa members would gain chartered status, which would become the aspirational level of most advisers. At the time many mocked my view, yet today we have not only thousands of chartered financial planners but also chartered firms.
Back then I also said that we would have a smaller but more qualified advisory sector in the future, but even I did not anticipate how low the number would become. Back in 2000 there were over 100,000 advisers, while today the FCA tells us that there is only roughly a quarter of this number. Back in the 1980s and early 1990s advisory numbers even hovered around 300,000. Some were part-time, few held formal qualifications, and commission and high-charging products were decisively the norm. Thankfully today we have a cleaner, fairer industry, supported by a true advisory profession.
Good news? Well, yes and no. No one could be more proud than I am of the educational developments that have taken place, or the way that advisers and planners have risen to the challenges, but I am equally disappointed with the low numbers we now have serving the public, and I greatly fear for the financial well-being of our country because of this. Put simply, we now have a mistrusting public who have little contact with advisers and a low opinion of what we do, and unfortunately this view is still sometimes shared by the government and occasionally even our regulators.
Looking forward we need three distinct outcomes:
1. A chartered profession that offers a financial planning service to those who need and can afford it. I believe that we are largely on the road to achieving this.
2. A simplified advice service offering a range of simple products as I have described over the last few months in this column.
3. An automated (robo-) advice service that allows individuals to ‘self-educate’ on financial issues, do their own basic financial planning, and then purchase the products that they will need.
When considering number 3, clearly Mas is well placed to help with the self-education, and frankly I would be more than satisfied if they only concentrated on doing this, and doing it well, rather than straying into advice. The commercial market is better placed to then deliver the outcomes, and crucially, take on the liabilities for any errors that their robo-advice models may occasionally throw up. Mas would do well to look at the excellent Sorted website in New Zealand and simply copy it. A couple of months ago I was privileged to spend time with a group of New Zealand IFAs who were attending a conference that I was speaking at for Henley Business School, Reading University (with sponsorship from AMP). The NZ IFAs have nothing but praise for Sorted and the way it interacts with professional advice.
Robo-advice is, however, a step further. Individuals will be able to go online, fill in a fact-find, and the system will make personal recommendations that the individual can then act upon and purchase the products that they feel are appropriate.
When I joined the industry in 1977 the most popular trade publication was Post Magazine. Each week they serialised chapters of a book written by John Cross that described his working life between the two world wars. It was called “People will always need insurance.” Today I believe we can add “and financial planning”. Although I am retiring from writing, I am continuing as a non-executive director of the Beaufort Group, for – as my doctoral thesis explored – I firmly believe in the value of advice.
Dr Peter Williams is an independent business consultant and chartered financial planner
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