A question that firms are currently grappling with is: do we have a good mix of clients across each generation and where will our future clients come from?
A good starting point in this area is for advisers to consider the wider family when dealing with individual clients and understand financial planning strategies that can benefit several generations.
There are also other changes that firms can consider in their processes, for instance, with a Lasting Power of Attorney for property and finance the client can specify in the preferences section that they want their attorneys to continue to use the firm’s services if they lose capacity.
This will avoid the risk of attorneys taking their business elsewhere or using their own adviser.
This approach would also allow a firm to develop a relationship with attorneys during the client’s lifetime and, as attorneys are often beneficiaries in a client’s will, when they inherit capital, a relationship will already exist with the beneficiaries.
One area that is becoming more mainstream, particularly with younger clients and millennials, is Environmental, Sustainable & Governance (ESG) investing.
Those who remain sceptical about ESG investing should take a careful look around them. ESG investing can trace its roots back to the emergence of Green and Ethical Funds in the 1990s, but this was a mere foretaste of what was to come.
The ESG initiative really took hold in 2006 when the UN launched the Principles for Responsible Investment at the New York Stock Exchange. But the initiative has caused problems since because the Principles were voluntary and aspirational and did not have any absolute performance standards for responsible investment.
The follow through is that ESG criteria can be vague and sometimes contradictory, and there are many divergent opinions within the industry as to what constitutes best practice.
Despite this, ESG investing is swiftly moving into the mainstream, yet many financial advisers are not engaging with their clients on the topic, and it does not form part of their standard process.
We feel that this will change in the near future for a variety of reasons, with the first reason being regulation. The regulators have decided to run with ESG, and MiFID is their first attempt to get to grips with the issues that need to be resolved in order to bring it into the mainstream.
MiFID currently requires firms providing portfolio management to obtain the necessary information about the client's knowledge and experience, their capacity for loss, risk tolerance and investment objectives to enable the firm to provide services and products that are suitable for the client.
MiFID II and Insurance Distribution Directive amendments are planned which will make it mandatory for advisers to introduce ESG considerations into their suitability assessments.