Innovating in uncertain times

But that is easier said than done in 2020 – a year that has thrown up many unexpected challenges.

A global pandemic, social unrest and Brexit looming over the nation’s head has made the likes of contingency planning, digital development and communication more important than ever for advisers in the UK.

That is why the IFA community took part in the Smarter Business Summit earlier this month to discover the latest skills, practices and insights needed to build a resilient and successful advisory business for the long term.

The virtual event was hosted by FTAdviser and sponsored by Charles Stanley to offer advisers a unique opportunity to reflect on how the industry can innovate in a new age of disruption.

An innovative way that financial advisers can secure longevity is by successful intergenerational planning.

Key Points

• Intergenerational planning has become much more important
• Clients should be feeling much more aware of the value of advice
• Technology is no substitute for good people skills

John Porteous, group head of distribution at Charles Stanley, said advisers can optimise their businesses for successful intergenerational planning by encouraging clients to have powerful conversations with their families.

This comes after its research in February found that only one in five UK adults talked openly about inheritance.

He said: “What we have heard from clients and those who advised clients over the course of two lockdowns is that there is a re-emerging of the art of conversation and an inward examination of the ‘what ifs’ around our own sense of vulnerability.

“Financial planning has a symbiotic relationship with uncomfortable truths and a skilled practitioner will bring these to the surface and put in place a proper action plan that will really resonate with clients.

When we asked accountants and solicitors what they have changed during lockdown the answers were unanimous: we have become better listeners John Porteous, Charles Stanley

“Powerful conversations are driven by questions, not statements or assumptions. Precision and tone of questioning is at the heart of this. Better questions allow for better answers, which in turn drive better financial planning outcomes.

“When we asked the wider professional advice market – accountants and solicitors – what they have changed during lockdown to help clients deal with their intergenerational discussions, the answers were unanimous: we have become better listeners.

He commented the elephant in the room was that we all look at money through our own unique lens. The issues are universal but conversations must be uniquely personal.

He said: “I don’t believe the intergenerational discussion is easy, but once bridged by a skilled practitioner, I think it is highly rewarding. Not only is this a commercially significant market but a rewarding one that can help you expand your practice and put down stronger roots through your client bank.”

Engaging with future generations

Building relationships with the next generation of clients will be the key to success, according to Giles Dunning.

The partner and M&A financial services specialist at Stephens Scown, flagged up the importance of engaging the young – both by recruiting young staff and engaging with younger clients.

He said: “Let young graduates know what a great career being a chartered financial planner can be – really make something of that. I don’t think enough of that has been done to bring new blood into the profession. Bring in advisers who can engage and empathise with clients – particularly the younger generation as they become more prevalent within the client demographic.

“Why not engage with younger family members earlier on and challenge the perception that there’s an advice gap for younger people who are not yet high-net-worth individuals.

“Connecting with them earlier on will pay dividends further down the line. We hear much about the great wealth transfer with many trillions of pounds being transferred from one generation to the next.

“In the next 10 to 15 years, companies should make sure they are well-placed to capitalise on that by really engaging with the next generation.”

However, he added that tapping into younger people means new challenges as young people are more likely to shop around for a better deal, compared with older generations, who make more loyal customers.

Youngsters are not the only untapped goldmine. In fact, Jane Portas, co-founder of Insuring Women’s Futures, said advisers must start leveraging the opportunity in advising women.

She said: “I know many advisers comment on how important it is to engage with couples but there are still very big gender gaps. So there’s a lot of opportunity to support levelling up with clients and supporting the life decisions, not just the money decisions.

“At the moment women have less linear life journeys, but in the future, we are all going to have non-linear life journeys, so we can learn a lot through engaging with women and how we can support all clients in the future.”

Promotion pays

Another way IFAs can increase their clients’ base is by widening the small pool of people who use an adviser. Phil Bray, founder and director of The Yardstick Agency, said this can be done by promoting the benefits of the industry.

He said: “Research from Boring Money showed that only 9 per cent of adults in the UK have a financial adviser, so that is at a real macro level. It’s clear that for the majority of people that financial planning isn’t a thing.

“But I want 2021 to be the year we show the benefits of financial planning. Get your propositions right, and then start to shout about it though client stories, client videos, online reviews, engage with journalists locally, and social media has got a massive part to play. 

“I’ve seen some advisers doing some great things on LinkedIn to really demonstrate the value of financial planning. Be proud – financial planners are doing great things.”

The current pandemic has propelled the nation into adopting more digital solutions to enable staff to work from home and to engage with clients successfully.

Although some IFAs faced teething problems getting to grips with the new way of working at the start of the pandemic, now advisers are taking a lead in improving their digital services.

This was noted by Daniel Marsh, head of ecosystem at Seccl, who highlighted the importance of integrating old and new technology to create a seamless back office experience and to use standard technology to save time and money.He argued this will enableIFAs to develop a more personalised business.

He said: “The conversations we’ve had as a business with advisers have been that technology and integration has been on the agenda for quite some time – probably the past three or four years.

“But while it’s always been on the agenda, it’s not been particularly at the top of the agenda. After the pandemic, we haven’t had any conversations where technology isn’t the top priority.

“Ultimately, the way we see technology is enabling advice firms to work in a way that they want to work and provide the service they want to provide to clients and to do that, theoretically, entirely digitally – if they wish.

“Of course you might still want do various parts of that face-to-face and I am sure that the future won’t be fully digital in terms of client meetings. But the ability to work that way is certainly a future I think will be worth embracing.

“If you go back three to five years ago, advisers saw themselves as passive consumers of technology – someone built a system and an adviser firm integrated that system into their way of working. But now we have seen advisers taking more control of the process.”

Mr Marsh argued this is particularly important because a large number of providers are still falling behind on the digital revolution as many still require a wet signature on contracts.

Worryingly, he highlighted research by NextWealth, which was published after the first lockdown in April and found that 42 per cent of processes across all platforms require a scanned original to be sent to the platform.

Commenting on this, he said: “In a previous life I used to work in the advice business and one of the biggest frustrations for me was we were perfectly happy to use digital signatures for a large number of outcomes in our business, but the providers that were using the platforms we use at the back end wouldn’t accept it.

“We were perfectly happy with the DocuSign approach, we knew it made sense, but we couldn’t implement it because the provider wasn’t thinking that way. The tools exist but adoption needs to improve.”

Face-to-face benefits

However, no amount of technology can be a substitute for good people skills. Mr Marsh said: “The advisers that are going to do very well over the next period are going to be the advisers who have focused very heavily on what benefits clients get out of face-to-face meetings.

“They get high empathy, high engagement and high quality of service. If you can keep your active listening, your social cues, and all the high empathy stuff that makes clients love the service they get, then I think that can translate well digitally.

“Those that do it really well will stand out much more now than they have in the past.”

A similar sentiment was echoed by Wanda Goldwag, chairperson for Financial Services Consumer Panel. She said: “One of things financial advisers have to think about is how they use digital in a way that convinces people that they have thought about it and are having an interaction.

“Otherwise, why go to a financial adviser? You might as well go to a robot one. People quite like the human connection. They want to know that their adviser has listened to them. I think you need some human interaction.”

Ms Goldwag used the summit to highlight the changes in RegTech due to the shifting global power dynamics and Brexit.

She argued that there are new opportunities to build a smarter UK RegTech landscape by refocusing on client protection and considering risk, data usage and innovation.

She said: “Brexit is one of the bigger things happening to our country in the next decade. Brexit means some opportunities are going to come up in terms of RegTech and also possibly some harms.

“RegTech solutions are only as strong as their understanding of the regulation they are tailored to. We know HM Treasury is thinking about how the industry should be regulated and there is a thought that Brexit might give us the opportunity to have a ‘bonfire of regulation’.

“And that may seem like great news to some of you, but my suggestion to you is that actually good regulation helps good companies. Good regulation stops poor behaviour by other people, it stops the reputation of the industry being damaged and it makes people who obey the rules more competitive and businesses stronger.

“So, one of the things I would say the Financial Conduct Authority needs to do in terms of RegTech is make sure it becomes ever more fit for purpose in the world we live in.”

She added that without the time constraints of EU directives moving slowly through the EU parliament, the FCA will have to react much more quickly to new technologies and crime trends.

Its ability to quickly legislate could give the UK a further competitive advantage over other European countries, which has the potential to cement the UK as the home of FinTech and RegTech.

Business legacy

Once an IFA has built up a successful business and client bank, their attention will naturally turn to succession planning for their own business. Ben Spratt, regional director at Retiring IFA, said advisers should keep an open mind when deciding on whether to go down the internal or external sales route.

He believes there are pros and cons for both options, and advisers will have to decide if they want a handsome profit from an external sale or the continuation of their legacy through an internal sale.

Mr Spratt said: “The advantage of going internal is general business continuity. The key defining components of your business that really define what you’ve created and built up – the branding, the staff, the client proposition, the heart and soul of the business – a lot of that will remain the same.

“It may turn out there is such little change that the clients don’t realise you are missing and that you are no longer there. Faces you know and trust will be taking responsibility for your life’s work and continuing your legacy and the ethos of your business. And that definitely has a big weight.

“However, the IFA acquisition market is a competitive one. In the majority of cases we see firms that have deep pockets with both the means and the appetite to put in more than the internal route.

“What we typically see is if people choose to go internally, then they can be taking a discount of between 15 per cent and sometimes even up to 40 or 45 per cent on the value of their practice, compared with what they could get externally.”

Another disadvantage to the internal route is the length of time it takes to be paid for the sale.

Mr Spratt added: “The way you get paid for your business is also likely to be different. Unless your successor has access to large amounts of a big capital pile, your payments for the business will likely be spread over a longer number of years; we have seen four, seven and even eight years.”

The virtual summit will run until January 3 2021. Log on to https://events.bizzabo.com/238061/home for more information.

Aamina Zafar is a freelance journalist