How financial advice is changing

“Before we start, could you run through your process and costs? When I think of financial advice, I think of estate agents and car salesmen too. No offence.”

These were the words from a recent client in May 2022. Should I have taken offence? Perhaps. But her concerns are not unfounded. There is work to do in our profession to change this perception. The good news is there is a slow shift to better advice and better outcomes for financial advice clients.

‘The Times They Are A-Changin.’

Technology

Not so long ago, I would drive two hours for a client meeting and then two hours home again. I would take a folder stacked full of various brochures and paperwork for my clients to sign, then head back to the office to scan everything and shred. Furthermore, the pension provider would send welcome paperwork to my clients and a paper copy to our office…

Our profession has struggled with technology.

But it’s getting better. We’ve seen a considerable shift in advice firms embracing technology in recent years. Ultimately, this drives down costs and means advisers have more time to spend with their clients.

At Engage Wealth Management we use digital fact finds, digital signatures, online identity verification, and we’re virtually paperless. We hold over 80% of our client meetings online.

The technology space in financial advice right now is exciting, honestly.

Technology, used efficiently, can provide better advice to more people.

Financial Planning vs. Financial Advice

Financial planning, rather than advice, focuses on your goals and what you want from life. Like a runner doesn’t begin a training plan without a goal in mind, a financial planner doesn’t invest your money without first discussing goals and creating a plan.

We see a shift away from advisers providing products and focusing on minimum investment values.

Cashflow Modelling sits at the centre of financial planning. Cashflow Modelling allows advisers to create powerful lifetime cashflow forecasts, helping clients visualise their future lifestyle and income. It is one of the most critical pieces of technology for advisers.

Whatever we call ourselves, a move to focusing on planning rather than products is good news for our clients. For this article, I will call us ‘advisers’.

Qualifications

When I first studied to become a financial adviser, I completed a Certificate for Financial Advisers. It took nine months, and I passed with no prior industry knowledge or experience. Our regulators have introduced further qualifications since then. 

Nowadays, the industry standard is a Diploma level qualification. But advisers take pride in their qualifications. Many advisers are continuing to chartered level, which I believe will become the industry standard in the future.

More qualifications are excellent news for our profession.

Fees

We’ll keep this short to avoid advisers debating it for hours in the office.

Most advisers have used a percentage model since 2012 – you invest £100,000 with us, we’ll charge 3%. It sounds simple, but this style of charging has its faults.

There is a shift towards fixed fees – you pay for the advice initially, then perhaps a second fee for implementing any changes.

Fixed fees seem to be more transparent and fairer, but it will take time to see this change happen industry-wide.

Independent vs. Restricted

Another subject that could be debated until the cows come home. I won’t sit on the fence here – I am an independent financial adviser. I genuinely believe this is the best style of advice.

But we’ve seen a change with clients, too – when researching advice, this discussion often comes up. We see more people seeking independent advice.

The youth of today

The average age of a financial adviser in the UK is still somewhere around 58. This poses a problem for our profession. Most advisers will be retiring in the next ten years.

Thankfully, many young professionals have seen this as an opportunity. The average age is also beginning to shift downwards. Younger advisers can only be good news for clients receiving advice. Coached by more experienced advisers, the next generation will be by their clients’ side for 20-30 years.

Younger people are also seeking advice. With the benefit of younger advisers understanding this demographic, coupled with greater technology, more people should have access to advice in the future.

2022 and beyond

The perception of the financial advice industry has changed and continues to evolve.

We have highly qualified, highly regulated advisers embracing technology and providing holistic financial planning. This ultimately means better outcomes for clients in the UK.

The pinstripe salesmen are out; professional financial planners are here to stay.

Oliver McDonald
Director
DipFA PETR CeMAP CeRER
+44 (0) 1273 076587
+44 (0) 7545 522150
www.engagewm.co.uk
Unit 5, English Business Park, English Close, Hove BN3 7ET