Has the pandemic transformed financial advice for the better?

Many of us adapted to the restrictions of lockdown and working from home, while for others the threat of the virus meant months of self-isolation and a potentially fatal illness. 

So the impact of the crisis on the financial advice industry goes beyond market volatility and its impact on investments - redefining, perhaps permanently, the role advisers play in their client’s lives. 

Intergenerational wealth transfer 

In a world changed forever by the outbreak, John Porteous, group head of distribution at Charles Stanley, has predicted one of the most notable changes in the relationship between advisers and their clients will be a greater focus on intergenerational wealth transfer. 

Speaking at FTAdviser’s Financial Advice Forum last month, Mr Porteous said: “Families are increasingly waking up to its importance and that is in no small part due to the emotional strain of the past six months, and the subsequent emergence of a ‘what if?’ generation. 

“It is undeniable that society has experienced a level of anxiety that arguably has not been seen for generations.

“While this can manifest in many and varied ways, many people have started to ask themselves three questions: what if, am I prepared, and is my family prepared?”

In research commissioned before the pandemic, Charles Stanley found just one in five adults were openly talking about inheritance with their families. But Mr Porteous predicted this would have “considerably” increased if the same question were to be asked in the wake of the crisis. 

He said clients were becoming more reflective and opening their minds to the importance of intergenerational planning, but warned the conversation was not always smooth sailing. 

Mr Porteous said: “Talking about our relationship with money is difficult, and for some it is highly emotive and for others divisive. In many cases it can expose jealousy or anger around perceived inequality of status within a family unit.

“It can be hard in our profession of wealth management and financial planning to appreciate how deep-rooted these issues are, given that we talk about money all day as part of our business.

“In my experience, when emotional issues are tackled by logic alone the outcome is not always a happy one.” 

It would seem the industry has already begun to act on greater client demand for intergenerational wealth planning, with SimplyBiz reporting a sharp rise earlier this year in advisers interested in its training courses in this area. 

In May the support services company said it had received more than 300 bookings for 15 courses in will writing and estate planning, which were launched at the start of April.

Indeed, when writing for Financial Adviser in the summer Ken Davy, chairman of the SimplyBiz Group, said the coronavirus had “resulted in a dramatic increase in the number of clients seeking guidance on wills”.

In meeting the needs of a client base increasingly concerned with the transfer of wealth to the next generation, Mr Porteous said advisers must become accustomed to using their soft skill sets before “hard” financial facts.

He said: “They can be really delicate conversations and do require empathy, compassion and understanding alongside technical knowledge – we can’t bludgeon our clients just with knowledge itself.

“Focus on soft skills to create an environment where clients are more willing to open up and talk more openly, without being judged or bombarded with the technicalities of tax and estate planning.

“The precision and tone of questioning is at the heart of unlocking the client opportunity and therefore the commercial opportunity as well.” 

Advising the vulnerable in a post-pandemic world 

While some would argue it is never too early to consider writing a will, the very nature of intergenerational wealth planning means clients are often part of an older generation or living with possibly terminal conditions. 

This proffers new challenges as vulnerable clients emerge from months of shielding amid the coronavirus pandemic and adapt to the much-talked of ‘new normal’. 

In light of this, Mr Porteous stressed the importance of non-physical client communication and urged advisers to now take stock of how they present themselves in remote meetings. 

He said: “Clients are becoming more open to the importance of intergenerational wealth planning, but the settings for these discussions will not always be face-to-face.

“This adds another level of complexity, especially if clients are in a vulnerable population where perhaps they don’t want to travel into an urban setting to have these meetings and perhaps don’t want someone from that environment coming to their house. 

“These types of conversations often take place against a very complex and confusing backdrop.”  

The Financial Conduct Authority has previously promised to take action against companies that fail to treat vulnerable customers fairly and last year put its long-awaited guidance on vulnerable consumers to the industry.

But work in this area hit stumbling blocks in March when the City watchdog shed “non-critical” work as it scrambled to lighten the regulatory burden on companies in the face of the coronavirus pandemic.

According to its latest regulatory timetable, the FCA is now tentatively expected to publish its most recent vulnerability guidance at either the end of 2020 or the first quarter of next year. 

Mr Porteous added: “There was already a huge regulatory spotlight on vulnerable clients and I would argue that Covid-19 and the crisis that surrounds it has increased this population considerably.”

FCA update 

Also speaking at the forum was Alex Roy, head of consumer distribution policy at the FCA, who shed some light on what the crisis would mean for regulation in the coming months.

Inevitably more important and valuable pieces of work will be stopped at the FCA while we can no longer see them as important in this current crisis Alex Roy

Mr Roy said the regulator was likely to delay more work as the industry battled an ongoing coronavirus workload, after it first moved to delay certain items on its to-do list in March. 

Alongside the aforementioned focus on vulnerable clients, areas of work hit by delays at the FCA as a result of the crisis include the regulator’s evaluation of the Retail Distribution Review and the Financial Advice Market Review and its suitability review of retirement advice. 

Mr Roy said: “Inevitably more important and valuable pieces of work will be stopped at the FCA while we can no longer see them as important in this current crisis.

“Our priority at the moment is to ensure firms are financially stable and, where they are unable to continue operating, that they close in an organised way and client assets are protected.

“This has brought a much closer focus from our supervisors on the importance of prudential requirements and our safeguarding rules.”

Tapping into the unadvised market 

While the pandemic may have seen some businesses batten down the hatches and focus all their energy on surviving the crisis, advisers are now being urged to look at a new and untapped client pool – the unadvised market. 

Sarah Lord (pictured, bottom right), chief client officer at Succession Wealth, told the Forum there was a “huge opportunity” among generation Z and millennials as an unadvised market.  

She said: “But for us to truly deliver and tap into that market, they need an approach that is technology-driven and human-enabled. 

“The client journey in this instance really needs to be technology driven, and by that I don’t mean a robo-service but more of a hybrid approach where technology supports the client journey and complements the human interaction.”

Research commissioned by the FCA in 2018 as part of its FAMR found nine in 10 adults in the UK had not received regulated advice in the 12 months prior. Of these, 39 per cent – equivalent to 18.2m people – had savings or investments of £10,000 or more. 

Ms Lord said a focus on generation Z and millennial clients as an unadvised market would be “beneficial for all”, but required a different approach than that currently used for existing older clients.

Ms Lord said: “It’s a bit of a misnomer that this generation only want robo-advice. Technology only supports the client journey so far.

“Millennials and generation Z still do want to talk to a human from time to time and touch base with their advisers to make sure they are on track.

“Accessibility is also key and technology certainly helps here, enabling clients to check their position or interact with their finances at a time which suits them.”

Finally, but perhaps most importantly, Ms Lord said the nature of an adviser’s fee model is crucial to ensuring younger clients engage with financial advice. 

She said: “I believe we need to look at it through a different lens when looking at the clients of the future as the untapped and unadvised market – one which is looking more like a Netflix subscription model.

“The next generation of clients are used to paying for things through a subscription and there is no reason why financial advice should be any different.

“It could go a long way to driving engagement from this generation and making it a viable proposition from the adviser and client perspective.”

Speaking during the afternoon’s tax stream, Rebecca Benneyworth, principal of Rebecca Benneyworth & Co, spoke on the challenges advisers face as a raft of tax changes will come into place in 2021.

She reviewed chancellor Rishi Sunak’s Covid-19 provisions, indicating that the rising bill might have a negative impact on general taxation in the years to come. 

She also examined changes to entrepreneur’s relief and discussed the impact on financial advice of the tapered annual allowance.

Speaking of the raft of changes faced by self-employed Britons as the Covid support comes to an end, Ms Benneyworth told delegates: “In terms of financial advice to clients, generally, you will only have to worry about businesses in difficulty.

“Tax debts – crown preference – comes ahead of the bank’s demands and ahead of fixed charges, such as mortgages. And in December, crown preference will come back, so if a business goes into insolvency, HM Revenue & Customs will take priority.

“This means banks are going to be a bit hot on the trigger with receivers, if you have a client in difficulty with a lot of tax debt, as the banks will want to get the receivers in before HMRC.”

She said she did not want to end on a scary note, but warned advisers to “be aware”. 

rachel.mortimer@ft.com 

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