Technology  

Do you need to change your advice model?

Steve Hutton

Steve Hutton

There’s no shortage of views on the current state of the financial advice market and its future. But most of them contradict what I am seeing as the managing partner of a national advice firm.

One such prediction that has been brutally exposed is that the robos would take over the advice market. Just to be clear, all the evidence points to the fact that robo advice has not made any material impact on closing the advice gap.

The altar to the gods of progress are littered with the corpses of pure robo advice firms.

The age-old issue of client acquisition has proved elusive to robos despite huge promotional cost. There is a distinction however, and it’s that the role of technology is on the rise but as an enabler not as an adviser’s replacement.

Time moves on against the background drumbeat of a widening advice gap that shows no sign of abating with the prospect of up to 15,000 advisers retiring over the next five to 10 years, according to several recent studies.

Life on lockdown has brought with it myriad difficulties, including two very practical ones for advisers. How do you find new clients and service existing ones if you can’t see them? If your firm is in the digital world, where clients certainly reside, then you’re thriving.

Those firms whose operations are still largely paper-based are barely surviving, as the daily headlines of unanswered emails, closed offices and furloughed employees have exposed.

The unshakeable truth remains that clients need advice, advisers do the expert work and technology is increasingly taking the administrative strain. All of which leaves more time for advisers to find new clients then provide a service to meet their needs. 

Both are crucial factors in narrowing an advice gap that is itself fraught with costs and risks associated with being a financial adviser, particularly those directly authorised firms. 

From PII and FSCS levy costs to any previous Defined Benefit pension transfer advice, the obstacles are real and are the intended or otherwise consequences of the Retail Distribution Review. This forced advisers to segment their client banks and furlough ‘non profitable’ clients, with small comfort of hopefully turning off ongoing fees in the process.

This cannot continue if we are to achieve former FCA chief Andrew Bailey’s intention to close the savings gap. The solution isn’t to spin the numbers once the magical disappearance of the FCA Register is reversed and say adviser numbers are increasing, but to look at the efficiencies of our advice landscape and for the regulator to drive and support change.

This should then provoke honest discussion about what an advice firm of the future, a future which has already begun, looks like.

The intangible nature of financial products means they still need to be sold to customers, acknowledging human interaction and referrals play a huge part in a thriving client acquisition programme.