Advice to be transformed by 2021, report claims

Advice to be transformed by 2021, report claims

The wealth industry will be transformed by 2021 due to the convergence of technological, demographic and economic trends, a report by Nouriel Roubini has claimed.

The research, carried out with companies such as SEI, State Street and Schroders, said advisers would have to adapt to this new environment by becoming “hyper-responsive, highly empathetic and digitally savvy”.

It predicted “massive” wealth creation over the next five years, with household assets rising by $89trn (£68trn) in 25 top markets, with the biggest gains coming in emerging markets such as China, Mexico and Poland as the middle-class in these countries expands.

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The report said: “The rise in household assets in these markets alone will pump over $50trn (£38trn) into the wealth industry.

“The asset owners, however, will differ. In the years ahead, a large percentage of today’s $168trn (£129trn) in global wealth will be transferred via inheritance from baby boomers to Gen X and millennials – generations that have repeatedly shown sharp differences in behaviour.

“Investors and providers have similar views on how the role of wealth advisers will morph in the coming years. The biggest shift is that advisers will need to provide even more responsive, on-demand advice.”

The report said advisers will need to be well-versed in investment management but also have a “human side” so they can understand their clients.

It also says the advice profession will need to become a “full-fledged profession with clear, enforceable standards”.

The report said: “For the moment these cultural shifts will favour firms that already have a fiduciary fee advisory model, such as many American registered investment advisers or British IFAs.

“These businesses, however, will face their own difficulties. The first is that many tend to be smaller than the big investment firms.

“In an era of price compression, they will need to learn how to deliver this model at scale.”

The Financial Conduct Authority has suggested that robo-advice might be a solution to the advice gap.

It is helping firms innovate through the creation of an advice unit, where it will work with firms looking to set-up automated advice services.

Scott Gallacher, an adviser with Leicester-based Rowley Turton, said: "There is a shortage of advisers and while I do think financial advisers should be responsive, even if advisers are pretty poor they will still have a business.

"The wealth is concentrated in the 50 to 80 year old category and with increasing life expectancy they are going to be here for at least 20 years. I am not saying it is not the direction of travel but I don't think it is happening any time soon.

"I still come across advisers who are still trading without a website in 2016."