Friday Highlight  

Six events that will dictate the future of advice 

Six events that will dictate the future of advice 

There are six events I firmly believe every business needs to consider and have a plan for over the next 18 months. These issues will impact on every advisory business, so ignore them at your peril. 

What are these then?

1) Robo advice 

Robo-advisers are digital platforms that provide automated, algorithm-driven financial planning services with limited or no human supervision.

Typically, the Robo-adviser uses an online portal and survey to collect information from clients about their financial situation and future goals. They then use this data to offer advice and investment options for the clients assets. 

Robo advice is a threat, as money management has become a commodity. Tougher disclosure rules, new technology, expanding public access to news and the availability of low-cost investment choices is starting to dull any edge professionals once enjoyed. 

Inexpensive web-based asset allocation has accelerated this commoditisation. Robo advice when mainstream will address not only new millennial investors, for whom investing is just another online experience, but also retiring baby boomers, for whom reducing costs is the most obvious way to preserve capital.

As a result, many advisers may have to rethink their value propositions and upgrade their practices to prosper in the future against this competition.

2) Removal of trail 

The removal of trail commission proposed by the regulator in the recent FCA Asset management market study could hit the value of some advice businesses and see some experience financial difficulties.

If firms are operating on slim margins already and they lose an essential element of their current revenue, then it is not inconceivable that this could be the catalyst that pushes some businesses to the point of failure.

It will also be a major source of stress for many more. It is essential firms have their plans in place before the FCA acts to reduce any potential impact.

3) Future of platforms 

The FCA Asset management market study also announced that the regulator will undertake a review to determine if platforms enable retail investors to access investment products that offer value for money. 

Despite the price war and subsequent reductions on platform charging in recent years, the FCA wants to look more closely at the impact on platforms on competition and value for money for consumers and, it is also suggested, a greater role for them in achieving these aims.  

It will also explore how 'direct to consumer' and intermediated investment platforms compete to win new and retain existing customers. This makes your right choice of platform even more important as is the due diligence you undertook to reach that decision.

4) Advice model of the future

Figures from Legg Mason, which polled more than 15,000 investors globally, found that 76 per cent of UK investors would refuse to pay the typical hourly fee of £150 for financial advice.