Four issues facing advisers in 2023

Soaring inflation and interest rate hikes have dominated a significant proportion of IFAs’ conversations – with even well-off clients becoming uneasy about their financial future in some cases. 

But what can we expect in the coming 12 months? Speaking with our own advisers, there are four key issues on their radar.

Consumer duty

It is clear consumer duty is a hot topic for the Financial Conduct Authority. The regulator is talking about it at every opportunity, but where should advisers be focusing their attention as a result?

In many ways the new rules are merely an evolution of treating customers fairly (TCF) principles, which means firms who have already integrated these should not have too much to worry about. But this does not mean consumer duty should be taken lightly. 

Inflation was the watchword of 2022, and the situation is unlikely to change drastically.

The regulator will be going far more granular when assessing how businesses are run; looking at everything from how new advisers are brought in, to how client banks are segmented. 

Above all else, business owners’ mindsets need to shift away from how they protect their company through a traditional compliance standpoint to what processes mean for clients on a practical level.

This calls for careful rebalancing, paying close attention to the effect each and every new compliance procedure could have on processes and how every underlying decision impacts clients. 

Managing cost of living concerns

Inflation was the watchword of 2022, and the situation is unlikely to change drastically. With little certainty over the future, a growing number of clients will see their financial circumstances change for the worse this year. 

IFAs will have their work cut out as these individuals grow increasingly nervous, and as many begin deliberating whether they can afford to stay invested, or with a rising cash savings rate, whether it is worth them investing at all. 

Many clients will be forced to scrutinise each and every outgoing – including their investments. 

Advisers must get on the front foot to try and build confidence. This is crucial to minimising the chances of clients making decisions they may later regret. Our advisers are employing numerous tactics in this regard, chiefly upping the number of cash flow modelling check-ins being undertaken with clients and people to revisit their contingency plans. 

As we move through the coming months, we also expect to see advisers looking to produce more educational content that will reassure clients and counter against negative headlines they will be seeing in the news.

Championing advice

The question of how IFAs can demonstrate the value of advice has been debated for many years, but never more so than right now. With household budgets stretched, many clients will be forced to scrutinise each and every outgoing – including their investments. 

Advisers must have a watertight sense of the value their advice provides, particularly at a time when clients are not witnessing the strong growth they have become accustomed to in recent years.  

It is not enough to say, 'I reassured you that your retirement pot was safely invested when you were worried about the impact of inflation on your wealth' – this sentiment needs to be felt by the client themselves. 

Rising prices are not just going to be hitting clients, they are likely to bring difficulties for advice businesses too. 

Many advisers I am speaking to are making a concerted effort to frequently encourage clients to envisage their retirement aspirations and the future lifestyle they are aiming for. By having these discussions regularly, clients stay more focused on their goals, and come away with a deeper understanding of the role financial advice plays in helping them get there. 

It is reasonable to ask for more feedback in the current climate too. Asking clients what they felt they got out of each meeting can be a great way of reinforcing what they value about your service, while providing useful insights you can build into the service you provide in the future. 

Assessing business expenses

Rising prices are not just going to be hitting clients, they are likely to bring difficulties for advice businesses too. 

In the main our advisers are committed to ensuring that any cost increases for clients are kept to a minimum, which means getting creative in looking at ways to offset higher costs. 

We see many IFAs reviewing the amount of office space they are using versus what they need now that remote and hybrid working has become so prevalent.

Being prepared to get on the front foot and adapt will be crucial to maximising client outcomes. 

One adviser in particular was able to save thousands of pounds a year via small business rates relief by moving into a smaller premises, in the same location. There could be significant rewards for prudent firms reviewing business expenses and tax breaks on offer. 

In the face of another uncertain year, the value of high-quality financial advice is only going to become more pronounced.

Once again, being prepared to get on the front foot and adapt will be crucial to maximising client outcomes and helping them weather any further storms that may lie ahead. 

Simon Goldthorpe is joint executive chairman at Beaufort Financial