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The future of advice

Sharon Sutton, Managing Director, Thornton Chartered Financial Planners, assesses the situation for financial advisers in 2020 and beyond.

With all the huge worry, disruption and confusion caused by the coronavirus pandemic, we might just take the time to consider some of the key trends for financial advisers this financial year ahead – aside from the turbulence of stockmarkets and economic news. It feels as though the stormy and incredibly challenging first quarter is synonymous in some ways with dominant issues emerging over the advice landscape in the next 12 months. So what are they?

It is easy to focus on the things that affect the advice profession and see these as internal challenges. However, much of what affects us as financial advisers and planners has a significant knock on effect to the consumer. This is particularly the case where there is a structural challenge to the way that the profession can operate, resulting in reduced access to advice for the consumer

PII and FSCS

One of these is of course the current hardening of the professional indemnity market. There are also the broader questions as to whether the UK Financial Services Compensation Scheme is fit for purpose within an everburgeoning regulatory landscape.

The perfect storm of these two factors represent not only a potential existential crisis for parts of the advice profession, but also a significant possibility of reduced consumer protection in future. Even if the impact of the current PI crisis is contained, there is significant risk that, due to the resultant cost increases, even more consumers will find themselves disenfranchised and unable to access affordable advice.

Much of the focus from the profession so far has been around the impact on costs; the challenge of being able to obtain compliant PI insurance at all, and the clear lack of fairness of the current way that the FSCS levy is calculated in its existing form.

The profession has been mobilised, lobbying MPs in an attempt to get Government to look at the key challenges and to implement effective change. However, it will take time, being inevitably viewed through the Westminster coronavirus and Brexit prisms. Parliamentary time will be at a premium this year so any legislative changes to the FSCS or PI markets won’t be quick.

Consumer impact

In the meantime, can we focus on likely consumer detriment if the situation is not resolved? I believe that we, as a profession, should look at what we can do to improve the fundamentals ourselves.

We live in the age of money where every decision we make is affected by our skill and competence with it. In no other complex environment would we expect people to survive without any training. To me this is unbelievably negligent.

The lack of access to affordable advice and people being disenfranchised when it comes to matters of personal finance has not just arrived out of the blue, and isn’t solely a result of the FSCS or PI crisis. There’s been a serious lack of focus on financial capability in schools and a trend for the profession to focus on the needs of the wealthy, without ensuring that there is an advice ladder for those who are in the process of accumulating assets.

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