The turbulent economic and political events that happened over the past year are unlikely to be going anywhere anytime soon, according to Hargreaves Lansdown.
Chris Hill, chief executive officer at Hargreaves Lansdown, said looking back at 2022 the industry has seen the fallout from the Russian invasion of Ukraine and its related impact on Europe’s energy supply causing inflation to rise and the cost-of-living crisis.
“It has been a year of rolling geo-political surprises,” he said.
“What is not a surprise is that this has led to volatile markets and investor confidence at an all-time low.
“There has been an outflow from equity funds, as consumers look to reduce their exposure to more financial risks. Taken together with higher interest rates, it has been a year few of us would want to be repeated.”
These turbulent economic and political events, however, are unlikely to change anytime soon in 2023, he explained.
“It is during these toughest of times that clients look to us as an industry for reassurance and help to make good decisions with their money.”
Hill said there are some practical things advisers can do to help, such as improving the sort of products they offer.
He explained there is a need for a “more systemic intervention too” which would entail a policy framework that improves client outcomes and helps to tackle the advice gap.
“We believe people should have access to appropriate cost-effective advice at the point they need it,” he said.
“However, if the only option for improving accessibility to and engagement with financial planning and investment is regulated advice, we will not end up with a solution that makes a meaningful difference.
“The way to increase engagement is to build awareness, knowledge and confidence.”
Advice and guidance
Hill commended the forthcoming FCA review of advice and guidance, describing it as having “the potential to make a substantial impact on building engagement”.
Last month, the chair of the Treasury committee, Harriett Baldwin, tabled an amendment to the financial services and markets bill which will allow the government to create a new ‘personalised financial guidance’ regime in the UK.
The amendment, if accepted, would allow guidance to be given to savers and investors which considers their personal circumstances.
Under the proposed regime, provider firms who do not recommend a specific product or course of action would not risk this guidance being deemed as regulated advice.
Hill said this “shows a collective will to make this happen”.
“I remain convinced that the industry can help far greater numbers of consumers with their financial decisions if firms were allowed to better personalise their content to individual circumstances under a new regime for regulated personalised guidance.”
He explained that doing so would allow firms to innovate in the delivery of information to help people make better decisions as they could use relevant data on investing behaviour and activity to provide targeted insight.