Money Marketing‘s cover features provide an in-depth look at an important topic within the financial-advice sector each month.
Here’s what we’ve been exploring in 2024…
February: Making trends and influencing people
We live in tumultuous times with the constant threat of global instability, the rise of AI and the everchanging regulatory landscape. And while we don’t have a crystal ball at Money Marketing, our first cover feature of the year aimed to look ahead at the key trends that will shape the future of financial advice.
To that end, we explored five areas – global politics, technology, demographics, regulation and costs – that will have the most impact on the sector. We also discussed what firms and individual advisers should be keeping an eye on if they want to survive the coming storms.
March: Why letters of authority are stuck in the past
The letter of authority (LoA) process is a vital part of onboarding clients, and yet it is also the biggest pain point for most advice firms. It is incredibly inconsistent, and has been for many years, which leads to “significant time wasted by firms”, according to a report by Origo and the Lang Cat.
“It’s difficult to know where to send the requests to, in which format, and even if both of those simple tasks are accomplished there’s the processing time to add to that,” the report states.
In an era where technology has come so far, the industry should be doing better than wet signatures and stacks of paper. So, what’s the right way forward?
April: Pensions are on life support – but how do we save them?
We are in the midst of a pensions crisis. Experts have warned that UK adults aren’t saving anywhere near enough money to ensure a comfortable, or even moderate, retirement.
Around a fifth of working-age private-sector employees — approximately 3.5 million people — do not pay anything into their pension. And, according to the Institute for Fiscal Studies (IFS), 61% of people who are making contributions are saving less than 8% of their earnings.
Something drastic must be done to breathe new life into pensions, before it’s too late. Urgent workplace savings reform measures, including increases to contributions, could be proactive first steps towards better pensions for the UK population.
May: Advisers at breaking point
Fear of yet more regulation is the main issue keeping a third of advice business owners awake at night. In April, Money Marketing conducted a poll that asked advisers what impact it was having on their mental health.
Almost half (46%) said it was so bad they were considering leaving the profession. Altogether, 22% described regulation as having a ‘big impact’ on their wellbeing; 15% said it was having ‘a bit of an impact’; while only 17% said it was having ‘no impact’.
Regulation ensures that consumers get the best outcomes and helps to keep firms accountable for their actions and for the amounts they charge. But is it realistic, or financially viable, for smaller firms to keep up with the pace? And what are the regulators doing to ensure that implementing their changes is achievable?
June: Why the reality of impartial advice falls short
Today’s financial advisers must look at a diverse range of relevant products to ensure a client’s investment objectives can be suitably met. IFAs cannot limit themselves to in-house products or those offered by firms with which they have a connection or relationship.
However, all businesses need to be profitable to survive, and to do this they cannot exist in a vacuum. Even with the ‘independent’ badge, advisers are not self-sufficient. To be able to act in the best interests of the client, they must navigate a range of relationships — with product providers, platforms and suppliers.
July/August: What financial services needs from the new government
The 2024 general election campaign revealed a widespread distrust in the political process and a lack of enthusiasm in the party leaders. No one believes what anyone says, and no one thinks anyone has the answers.
The appetite within the financial services sector is for a steady hand on the tiller. In that spirit, we’ve picked four areas that would most benefit from reform: regulation, tax, Isas and pensions.
We have spoken to experts in each case and identified the low-hanging fruit that is ripe for picking. Then we have put forward some proposals that should be on the shopping list of the new government.
September: ‘We’re expecting turbulence’ – Why psychology has never been more important in advice
With uncertainty all around, advisers are best placed to cut through ‘fake news’ about the markets and engage with the financial psychology of their clients.
BareRock head of behavioural science Babs Crane suggests that, when interacting with a client — potential or new — advisers should aim to build rapport and approachability.
“That should be the thing you lead with, before you follow it up with demonstrating your competence and giving information,” she says.
But there is a tendency, she adds, to lead with competence rather than warmth, especially in a knowledge-based business such as financial advice.
October: Tackling the adviser gap: How firms can build a bridge to the future
There is already a well-documented advice gap. Many people who could benefit from advice lack access, either because of cost or because they simply don’t know it exists.
This will only get worse if the number of financial advisers in the UK drops, as is predicted in the next five years. But why do so few people seek a career in the sector?
“Often, it’s just not something that’s on the radar of people at school, university or college,” says Chartered Insurance Institute (CII) career partner manager Claire Bishop.
Historically, workplace programmes were offered to school and university leavers by big accountancy firms and law firms, but advice was rarely flagged as an option. This is still the case, so things need to change.
November: Trade Body 2.0 – Does the platform sector need a new voice?
In the past, many attempts have been made — unsuccessfully — to bring platform providers together under an umbrella group. The setbacks have always been attributed to the competing interests of platforms and, until now, there has been no formal trade group to represent the community.
The sector’s views have instead been represented by various organisations. However, all that is about to change with the formation of the Platforms Association.
The association, which was launched in late September, wants to be the representative voice of the multibillion-pound platform sector, and several platforms – including Abrdn, Aegon, Fidelity, Quilter, Seccl and SS&C – have already signed up.
December/January: FCA sets its sights on targeted support
The Financial Conduct Authority has acknowledged that the current advice landscape is failing those who need it most.
Firms are limited to either providing holistic advice, a regulated activity, or offering general information and guidance, which falls short of making personalised recommendations.
However, many firms interested in offering more affordable support to consumers are deterred by concern about inadvertently crossing the boundary into advice. How do we solve this conundrum?
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