Top trends shaping advice
The primary trends we expect to define 2022 include the acceleration of the generational wealth transfer; further demand for hyper-personalisation; the continued innovation of open finance; and the importance of using technology to deliver results. This could be a year when advice businesses start to take more meaningful steps to address their strategies.
The great wealth transfer
While some still scoff at the notion that significant value will change hands and new wealth holders will not want a simple continuation of the current business-as-usual advice model, it is clear that being unprepared to support a new generation of clients could be a big mistake.
The wealth transfer itself is undeniable; however, the speed, shape, and recipients of the transfer are what could force things sideways for advisers.
Available wealth is at an all-time high and compounded by a global pandemic, which has reinforced the importance of life fulfilment. Today more mass-affluent and high-net-worth individuals, couples, and families are making plans to ensure that wealth is passed down effectively. As the pandemic’s day-to-day impact hopefully eases in 2022, we could very well see a meaningful acceleration of wealth succession plan executions.
We may also start to see the transfers beginning sooner, either in full or in part, skipping a generation. The next generation after baby boomers is often fairly financially secure with their own plans in place. However, it is harder than ever for those younger generations, such as those in their 20s, to clear debt, step onto the property ladder, and accumulate wealth.
As that happens, it should not be underestimated how the change in client expectations and behaviours for financial advisers could be even more pronounced than if the wealth were simply shifting one generation at a time.
It is therefore critical for advisers who want to protect their assets under advice and revenues to start building a strategy to meet the needs of a different client base.
In all likelihood, the next generation of wealth holders will be accustomed to greater choice, especially around engagement and fee models. They will also expect to be able to interact digitally wherever they are, using the device of their choice. They will expect personalisation of service and solutions and an overall connected experience that offers demonstrable value beyond the end outcome – all with minimal friction.
Like other industries, this is the direction in which consumers are moving, and there is likely to be little loyalty for prior value if they can not meet today’s demands.
Hyper-personalisation
With the great wealth transfer as a backdrop, it is likely that hyper-personalised advice and service models will continue to be at a premium.
All generations of clients are increasingly looking for personalised relationships, and it is no longer acceptable to assume personalisation is a purely aesthetic component.
Clients now expect their advisers to know them, their situations, life goals, and personalities. They also expect them to use this information to build a plan that accommodates all these aspects and considers how to deliver a memorable experience and success.
Historically, advice models have been defined by the adviser and are often predicated on pre-set optionality. However, advisers will need to break down those mental models and consider how to evolve their propositions to be able to accommodate any number of different client needs and preferences.
Realising the potential of open finance
We expect that 2022 will also bring the further evolution of open finance across the supply side and the advice side. Many specialist fintechs are developing new innovations to accelerate the availability and effective use of more data, and businesses are also looking to meet the expectations of a changing client base.
Adviser businesses have made good ground in recent years in delivering greater efficiencies through the combined use of data and technology. But there is still a long way to go, especially as advisers aim to drive deeper engagement, operate more dynamically and provide hyper-personalised advice services.
While it has yet to reach its full potential, open finance expands the availability and integration of end-client data across investors’ entire financial footprint and has the potential to be a big part of the solution. This data, from both individuals and small businesses, has the potential to help unlock huge value for advisers. But building and managing a modern data strategy and capability is a tremendous challenge.
Using technology to deliver results
Undoubtedly, technology will play a vital role in adapting to a new generation of clients, delivering hyper-personalisation, and maximising open finance. It is vital that the technology truly serves these purposes and is not simply focused on creating efficiencies (though those are important too).
It is crucial that advice businesses are well-positioned to integrate and apply technology and data to enhance their practices. Specialist partners can provide critical insight, capabilities, and skillsets to help navigate what can be a difficult evolution for many businesses.
We can confidently say that these current trends will just be the tip of the iceberg beyond this year. As technologies continue to advance, advisers’ levels of sophistication will be what determines how well they can keep pace with client expectations.
Russell Andrews is global head of advice solutions – asset management distribution at SEI
