I spoke to a friend of mine recently whose elderly mother had been taken into care during lockdown.
He is close to his mother and was distraught. On top of everything, her house had to be sold and he had to manage the proceeds.
He had spoken to a financial adviser, but knowing I was in some way connected to the industry asked for my view on the advice he had been given.
My friend is an intelligent, successful professional but as we talked it became clear that he didn’t have even the most basic idea about the choices he faced nor how much he should pay.
What was clear though was that he trusted the adviser he had spoken to and that he felt they had his best interests at heart. It was very apparent to me that that trust was worth a lot.
When life gets complicated - and for many clients and prospective clients over the last 12 months, life has become much more complicated - professional financial planning and advice becomes even more valuable.
Of course, my friend is not alone. One consequence of Covid-19 has been the greater levels of intergenerational wealth transfer driven by higher sickness or mortality levels in older people.
It is also true to say that, generally, wealthier people have increased their financial wealth during the pandemic.
According to the Bank of England, higher income and retired households are almost three times as likely to have increased their savings than seen them decrease.
Fair customer treatment
A significant proportion of the industry’s traditional client base have more money, and more need for advice and financial planning, as the country begins to plan its exit from the pandemic.
Another consequence of Covid-19 is that the FCA’s focus on value for money has been delayed.
One senses that this pause has only been temporary. A year ago, before lockdown, the regulator noted: “We have concerns that advisers may be recommending products with an ongoing advice requirement, potentially instead of more suitable options that do not have ongoing fees.”
This month, the FCA introduced the new Investment Pathways, which are no doubt in part designed to anchor price points in consumers’ minds. You can see the direction of travel.
One consequence of Covid-19 has been the greater levels of intergenerational wealth transfer driven by higher sickness or mortality levels in older people.There are clearly significant opportunities as we exit the pandemic to serve clients more deeply and increase levels of engagement. However, given that 70 per cent of adviser firm income is now through ongoing adviser charges, the focus on value for money presents a challenge to many business models.
Adding value, above simply providing an annual portfolio statement, has traditionally been assumed to require face-to-face meetings and travel in addition to the time-consuming activities of ongoing suitability analysis and Mifid II compliance.
Many firms feel that their capacity to add more value on an ongoing basis is therefore constrained. But Covid-19 has changed this too.
Clients of all ages are welcoming video interaction, particularly for ongoing updates and bite-sized, ‘what if’ discussions. Cost to serve has plummeted.
Financial planning technology has moved on too, with systems increasingly automating the underlying planning analysis and designed to enhance engagement between the adviser and the client - or indeed for use by the client themselves.
Evolution of advice
As an example, 57 per cent of risk profiles in Dynamic Planner last month were completed by clients online or on their mobiles, compared with 14 per cent pre-pandemic.
Firms up and down the country are screensharing engaging, easy-to-understand annual review and cashflow analysis. The scope for trusted professional advisers to deliver cost-effective client engagement, just at the time when many more individuals will need it, is now an order of magnitude greater than a year ago.
Another consequence of Covid-19 is that the FCA’s focus on value for money has been delayed.Financial planning FinTech is also bringing together more and more investment solutions risk matched or targeted to the models used in the planning system, including growing numbers of sustainable options.
This means that advisers can more easily and visually set expectations around risk and return, and then at review, demonstrate their value in terms of returns generated for the risk taken by using risk-based benchmarks.
I know my friend would value this kind of service from his adviser and I was pleased to see that this, along with a cash flow plan, was what was being proposed via Zoom.
The pandemic has transformed the landscape for our industry, creating opportunities as well as the challenges of demonstrating and delivering genuine value for money.
The good news is that the technology and the investment solutions are out there to help firms engage with clients to do exactly this.
Once Covid-19 is finally behind us, our industry should embrace this change and resist the temptation to go back to the old ways.
Ben Goss is chief executive of Dynamic Planner
