By Simon Goldthorpe, Chairman at Beaufort Financial
The pandemic and its aftermath created significant challenges for the advice sector. Most firms responded with agility and competence, embracing technology, devising new working practices and managing clients through a difficult period.
However, 2022 has brought a new set of tests. From the war in Ukraine, to inflation and volatile markets, advisers will need to step up once again.
Inflation has been the story of the moment. The UK CPI showed a rise of 9.4% for June, with double-digit price rises forecast for the Autumn. This is a financially precarious time for clients, who face a decline in real income and significant volatility in their savings. They are likely to need the services of their adviser more than ever, for cash flow planning, for investment decision-making and, possibly, for some additional handholding.
Rising prices also bring difficulties for adviser businesses. Higher bills create a natural dent in the profitability of advice and there is a danger that some IFAs may be forced to raise their fees. Speaking to our own advisers, they are working hard to ensure that any cost increases for clients are kept to a minimum. Prudent business owners will always hold contingency funds to help them through a difficult period, but we also see firms reducing office space, now that fewer people are on site each day. If inflation proves more persistent than expected, reducing office space may not be all that is needed to reduce costs, but it seems that most advisers have sufficient resilience to defer the decision for 12-18 months.
Widening recruitment challenges
There is also a question over how inflation will affect salaries and recruitment. In common with many other industries, adviser businesses say recruitment has become more difficult. Power is firmly in the hands of job-seekers and the market is highly competitive, particularly for senior staff as geographical boundaries have disappeared, which is also a contributing factor.
However, most of the advisers that I’m speaking to are working to find solutions to this, recognising that, for many people, the priority is not the highest possible salary, but real flexibility in the way they work. Firms must keep this focus on finding ways to offer this flexibility while maintaining service levels to clients. Those who do so, bring themselves one step closer to generating genuine loyalty among their staff, which will ultimately help ensure low turnover and continuity.
Tying the tech together
The flexibility mentioned above is partly possible because of COVID-19. The technology revolution it precipitated is one of the few benefits of an otherwise horrible time. Advisers have found that their clients have not just adapted to technology, but embraced it. Zoom or Teams calls are widely used and have done wonders for the efficiency and ease of communication of adviser businesses.
Where advisers are moving office, they are ensuring it is configured correctly to allow advisers and staff to conduct Zoom meetings. However, there is still a challenge in bringing technology systems together. This is true across all aspects of adviser businesses – technology systems often don’t ‘talk’ to each other effectively and providers are devising ways to bring them together, which could be a major technology challenge for the year ahead.
Education, education, education
We expect tougher financial markets for the rest of the year and there will be plenty of noise in the media. While newspapers are keen to point out the “billions wiped off shares”, few point out when shares go up.
There continues to be a significant discrepancy between the ease with which investors can gamble on areas such as spread-betting or cryptocurrencies and the warnings required on a straightforward Isa investment. Advisers can do this work with clients, explaining that speculating on cryptocurrency is not the same as investing in a collective fund, but it remains a challenge for the financial sector as a whole and people’s long-term wealth.
It has been a difficult start to the year, but advisers have shown their creativity and flexibility through the pandemic and will do so again.