While we must not forget what everyone has gone through, the light at the end of this particular tunnel is getting bigger and brighter by the day, and the implications for financial advisers in particular are profound.
As we enter this new age of opportunity, with its expanding horizons, I would like to offer you three fundamental reasons why I believe the future is going to be exciting for the financial services sector in general, and financial advice specifically.
As the number of advisers has fallen dramatically, over the same period the cost of providing advice has risen significantlyFirst and foremost is the pent-up demand for financial advice. We were well aware before the pandemic that there was a shortage of qualified financial advisers, with the number having fallen from about 250,000 when regulation started about 30 years ago, to around just 25,000 today.
Unfortunately, as the number of advisers has fallen dramatically, over the same period the cost of providing advice has risen significantly as the direct and indirect costs of regulation (such as professional indemnity insurance and the Financial Services Compensation Scheme) have grown exponentially.
The inevitable result is a huge advice gap, with millions of consumers who could have benefited from financial advice being, quite simply, priced out of the market.
Not an achievement that brings any credit to the succeeding regulators or governments who have stood by and let this happen. Nonetheless, it is a harsh reality that will cost future governments dearly in social benefits – something that could have been avoided if more attention and encouragement had been given to helping consumers to save and protect their families.
Secondly, the pandemic and the accompanying lockdown has changed all our lives forever, and none more so than that of those of providing financial advice.
During the lockdown, delivering financial advice remotely via Zoom, Microsoft Teams or even WhatsApp and FaceTime became the norm, with countless thousands of interviews and presentations, including mortgage transactions and complex solutions, completed successfully.
I saw a survey recently that said half of financial advisers plan to continue with remote working and, frankly, I expect that the actual figure will end up being significantly higher as many clients, old and new, are going to demand it.
Thirdly, as you reflect on the reasons I have set out above, I hope you can appreciate why their impact is going to be so profound for financial advice, especially for financial advisers, their businesses and their profitability.
That there is a shortage of advisers is beyond dispute, as is the fact that the cost of financial advice has had to increase because of the higher costs of regulation.
Now, as a direct result of the restrictions of the past year, advisers and clients have been forced to embrace technology in a way that would have been unimaginable before the pandemic.
The result is a unique opportunity for advisers to expand their offerings to consumers by the creative use of remote technology and marketing.
The days when the average IFA might be limited to perhaps a maximum of 100 to 200 clients will for many disappear, as remote working enables such numbers to comfortably double and beyond.
Alongside this, there is a likelihood that advice will become generally more affordable, which in turn will help us narrow the savings and protection gap.
These are exciting developments, which will bring a great many opportunities for all financial advisers who rise to the challenge.
If you have any doubts about this new reality and its opportunities, you need look no further than the rapidly increasing number of private equity businesses and others who are investing millions into securing entry into the financial advice market.
Like me, they recognise the bright future that lies ahead for the financial services sector.
Ken Davy is deputy chairman at SimplyBiz
