Financial planning and self-directed investing can go hand in hand

Sally Plant

Sally Plant

Is there a place for self-directed investing? Yes. Is there recognition in the profession that to communicate with a younger client audience, social media platforms play a critical role? Undoubtedly. Do planners want to appeal to this audience now? Questionable.

The growth in self-directed investing is evident from the emergence of new platforms, social media sites and financial influencers. Self-directed investing attracts a younger, diverse consumer base to invest, starting with small sums for small fees across a breadth of funds.

Britain Thinks' research on behalf of the Financial Conduct Authority concludes that self-directed investors’ investment journeys are complex and highly personalised. It identifies three archetypes:

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  • Having a go (newer or less experienced self-directed investors);
  • Thinking it through; and
  • The gambler.

The research highlights concern that some consumers are persuaded by sales tactics/marketing to buy complex, higher-risk products that are very unlikely to be suitable for them.

This research aligns with the FCA’s new strategy to tackle investment harm, aimed at giving consumers the confidence to invest, “supported by a high-quality, affordable advice market, which should lead to fewer people being scammed or persuaded to invest in products too risky for their needs.”

However, the ability to self invest is helping to generate a keener interest in personal finance within a group that previously would have felt too young or too inexperienced to take part. That can only be positive, and arguably these consumers are a critical part of a business’s succession planning.

The ideal would surely be for younger generations to grow up seeing personal finance as the norm; an essential part of their financial wellbeing strategy and as an interest that sits alongside their career development, fitness regime and diet.

The challenge the profession faces is how to connect with this audience and channel their interest into seeking professional advice, to reduce their risk and attain their end goals. 

Professional bodies, businesses and the FCA need to work harder to communicate the differences between investing and planning to these consumers. It should be explained how they interlink and support each other but are entirely different propositions, both essential to client-focused outcomes. 

Maintaining connection and interest

Innovative services are also required to then maintain the interest and enthusiasm of this audience, so that they become the future client base.   

Director and financial planner Robin Keyte of Keyte Chartered Financial Planners has seen an increase in the number of new clients making contact purely for financial plans and not investment management, which he sees as a growing trend.

He views this as “a backhanded compliment to the financial planning process, that some consumers perceive that it is worth paying for on its own".

Lexington Wealth has now created a modified, lower-fee-based service for clients who want to manage investments themselves, by building them a plan that the client then implements. 

Warren Shute, certified financial planner at Lexington Wealth, explains: "Financial planning is about the client and their financial journey, it’s not about products. If we can build a financial plan for clients to help them live their best life, and they implement any products themselves online, this may well be the future of our profession, especially for clients with less complex requirements.