A new generation is ready to energise the industry

Ben Goss

Ben Goss

For many advisers working today, the pandemic is just one of a series of crises they have encountered in their careers.

A practice principal who is today 55 has not only weathered Covid-19 but also the financial crisis, the tech bubble, 1991, 1987; no wonder some are ready to hand the baton on to the next generation. 

Or, to put a more cheerful spin on it, many principals have built successful businesses over the past 20 or 30 years and are now ready to reap the rewards.

Given the appetite for acquisitions in the market, there are plentiful opportunities for advisers to sell up, ship out and settle into the type of stable and fulfilling retirement they have helped so many of their clients achieve over the decades. 

Anecdotally, while some are selling up to the consolidators, others are passing the reins to their children, nieces or nephews.

In one practice I check in with regularly, the two principals – a pair of old friends – have gradually transitioned the business to their two daughters – also close friends, who grew up together and took the decision to join the shared family business together in their 20s. Now that the daughters have served their apprenticeships under their dads, the older generation have stepped aside. 

Whatever the approach to moving on, the impact is the same: a new generation of managers coming through, bringing fresh approaches and facing new challenges. I am calling it the 'Great Rotation'. And I see three big implications. 

First, this new group of principals joined a professional industry that looked completely different from the one in which their predecessors started their careers. A decade on from Assessing Suitability and eight years after the Retail Distribution Review, advisers in their 30s today have never in their senior career known an industry in which fees were not charged and in which clients have not had to receive clear guidance on those fees. As a result, they have an understanding of investor protection that feels like a step change. 

Second, the new generation may find themselves with a particularly complex client base. The demographics of most practices still reflect the practice principals – it is widely known that advisers typically win and look after clients who are within 10 years of their own age. That valuable client base will be handed on, and the new generation of managers will want to retain it. As a result, retirement – arguably the most complex part of the adviser’s job – will still be the central concern for many clients, and strong risk-based cash flow planning will be a vital part of the toolkit. Regulatory focus on issues such as drawdown further complicates the picture for this group. 

At the same time, it will be important to secure the company's future by capturing new, younger clients. How can the new generation of advisers demonstrate the value that they add to their own age group? We are already seeing innovation in this space – practices providing advice to younger clients on a pro bono basis, for example, or businesses offering online seminars during lockdown.