Long ReadJun 7 2022

Broadening access to advice

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Broadening access to advice
(FT Money)

The financial advice industry has seen an astonishing change over the past decade.

It has become even more professional and transparent; education levels have never been higher and clients can be more confident than ever in the service they receive.

However, there remain key challenges in broadening access to financial advice, communicating its value and convincing future generations that they should engage with an adviser rather than TikTok.  

The question of how to broaden access to advice has been hotly debated. The administrative burden makes it difficult and expensive to deal with smaller clients and transactions. Advisers may recognise that they need to build a pathway to future generations, but relatively few have found a way to do it successfully.

And the perils of inaction are increasingly clear, with many younger savers apparently more inclined to take a gamble on crypto than invest in a Stocks and Shares Isa, for instance. 

Against this backdrop we believe we need a manifesto for industry change, looking at how the sector can learn from other businesses and develop innovative solutions which will better engage the clients of today and tomorrow.

Look widely for inspiration

There are a range of consumer-facing businesses harnessing technology to build excellent service propositions. To date, the advice industry has lagged. Clients stay because they trust their adviser and have built relationships, but their service expectations are rising, and the gap between the advice industry and other consumer-facing companies may become more evident over time. 

The greatest strength of companies such as flower delivery group Bloom & Wild is to keep customers informed at every step of the journey. Customers know which flowers they are getting, when they have been boxed and when they have been delivered. Ultimately, technology has allowed the group to streamline its service delivery. 

Taking such successes as inspiration, the advice sector needs to re-engineer its back office to clean up client data and make the advice journey more engaging.

The right technology 

Adviser technology has made relatively little progress in the past five to 10 years. Adviser apps, for example, have not built on the early innovation that promised so much.

Yet an adviser app that managed to aggregate lower value clients, allowing advisers to build a relationship with them (and even make a profit) would be a game-changer for adviser groups.

It does need more industry involvement – the requirement to reconnect accounts every three months will lead to apathy and non-usage by consumers.

Robo-advice is the solution for many smaller investors, but most will outgrow these solutions as their wealth builds and their needs become more complicated. Advisers need to think about how they can pick up these clients. That may mean forging links with robo-advisers, even if the mechanics of the relationship would need careful thought. 

The pandemic has made clients more technically adept. Most people have accepted video calls as a routine part of their life – to stay in touch with loved ones, to participate in online cultural events and to communicate with advisers.

The advice industry has proved itself excellent at adapting to change and just needs to put this same energy into digitising other parts of its business. 

Open dialogue

The FCA is an easy target for advisers, but there is no doubt that the relationship might be improved by greater dialogue and transparency on all sides. In particular, we believe the regulator would benefit from engaging with advised clients to tackle some of the more entrenched problems. 

At the moment, the advice industry continues to wrestle with the over-provision of information. Many advice businesses see this as a necessity to protect their business in the event of client complaints, but it makes the client less likely to engage with certain aspects of their financial planning. 

As such, the regulation may not be protecting clients in the way it is intended. Particularly for younger investors, there is a notable gap between the ease of engaging in high-risk strategies  – crypto, for example, or spread-betting, all available with a swipe on their phone – and the ability to access professional advice on something like an Isa.

Advisers and the regulator need to work together to resolve this problem. 

Sharing best practice

Too much focus is given to the bad eggs in the financial advice industry. It would be far more helpful for advice businesses to be equipped with tangible examples of good practice. Constantly warning consumers about the risk to capital, with no counter-balancing demonstration of the benefits of investing, just creates fear.

Certainly, the regulator could help achieve this by highlighting advice areas that are doing a good job. But advisers can also help themselves by being more proactive in sharing best practice. This may involve some self-promotion – shouting about the great work they are doing for clients. It is not always easy, but it will help build a better advice industry. 

The next generation is on the cusp of making some very bad financial decisions. Advisers need to find a way of widening accessibility and promoting the benefits of financial advice more broadly.

There is no silver bullet, but with advisers, the regulator and product providers working together, we can bring that next generation of clients one step closer. 

Simon Goldthorpe is joint executive chairman of Beaufort Group