People need advice more than ever

Ten years’ worth of – albeit sometimes meagre – GDP growth has disappeared, we are in the grip of a major recession with unemployment growing at an alarming rate and Covid-19 is still very much out there.

So, how can the financial advice sector help to fuel our recovery and what does the future of advice look like?

Despite the average UK defined contribution pension fund falling by around 15 per cent in Q1, fund managers have performed well and these losses are well on their way to being recovered, although they would have had little impact on people unless they were looking to retire imminently.

Nevertheless, prevailing uncertainty around people’s short to mid-term future is still a major concern for many.

Lower consumption over the past four months, particularly on travel and entertainment, means that many people have been able to save more, though this has predominantly been into cash. 

So, while it is unclear as to what extent Covid-19 has driven opt-outs from auto-enrolment and other saving schemes – and what the longer-term impact of this will be – it should be abundantly clear that financial advice will be key to protecting savers’ futures and providing badly-needed mental and financial wellbeing in these testing times.

But we still need a face-to-face element, even by virtual means

However, pricing and availability are critical, which suggests that robo or hybrid advice will gain traction in the marketplace.

Recent research by Deloitte backs this up. It found that, while there remains a significant advice gap driven by high cost, low financial literacy, low engagement and a lack of trust, automated advice can play a key role in generating low-cost solutions.

The results point to a sizeable pool of potential adopters, with around a third of those currently unserved willing to pay for advice in areas such as simple financial planning, investment and DC pension advice. 

But we still need a face-to-face element, even by virtual means. 

Another area of significant growth for the advice sector will be environmental, social and governance considerations.

In his recent keynote address to Pimfa’s Virtual Fest, Mark Carney, UN special envoy for climate action and finance, said that there has been a 20 per cent uplift in inflows to sustainable investment funds during the pandemic.

Here, education for advisers is key in enabling them to communicate the benefits of this area of investment activity to potential clients.

Prior to Covid-19, intergenerational wealth transfer, previously running at just under £70bn annually, was expected to double in the next seven years and rise to an estimated £5.5tn over the next 30, providing further opportunities for the advice community to engage more deeply with those that want to leave their descendants a significant inheritance as well as their heirs.

While recent research from Schroders suggests that Covid-related pension drawdowns may have depleted these figures, this remains something clients will need help with.

The more diverse the investment market becomes, the more diverse advice companies must be in response, providing an opportunity for a more balanced and geographically enhanced recruitment process utilising the latest technology to deliver to clients, resulting in wider diversity and inclusion within the industry as a whole.

Liz Field is chief executive of Pimfa