Clients and industry need greater engagement post-Covid

Ben Goss

Ben Goss

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. 

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.