By Ian Partington, CEO of Third Financial
The landscape of financial advice is on the cusp of a notable transformation. Approximately 6,200 financial advisers, nearly 20 per cent of the current workforce, are currently over 60 and may be set to retire in the next five years according to an FOI request to the FCA.
This impending exodus marks the twilight of an era dominated by seasoned professionals, but it also heralds a golden opportunity for a new generation of advisers to reshape the industry. As younger, affluent individuals increasingly turn to social media for financial guidance, the rise of ‘finfluencers’ – often unqualified personalities offering financial advice in an unregulated space – highlights a pressing need for credible, tech-savvy financial advisers who can meet the demands of modern clients. Finfluencers, primarily operating on platforms like Instagram, TikTok, and YouTube, have garnered substantial followings by offering accessible and relatable financial advice. While this trend highlights a growing interest in financial literacy among younger generations, it also raises concerns about the quality and reliability of the advice being disseminated. The allure of instant, digestible content can lead to misguided financial decisions, making it imperative for professional advisers to step up and bridge the gap.
By leveraging technology and AI, younger advisers can efficiently manage a larger pool of clients, picking up clients orphaned by retiring advisers and the influx of the richest generation in history, while maintaining high service standards. Technology can streamline many of the laborious tasks that have traditionally consumed advisers’ time, such as data analysis, portfolio management, and administrative duties. This automation gives advisers the tools they need to do a better job to a wider spread of clients.
Furthermore, the adoption of technology enables financial advisers to rethink traditional fee structures. The prevalent model of charging based on assets under management (AUM) may become less relevant. Instead, advisers can adopt a one-off fee model, making financial advice more accessible and transparent. This shift can attract a broader range of clients, including those who may have previously been deterred by the AUM model, or deemed ‘low-value’ by advisers and therefore not offered advice. By offering flexible and affordable pricing, advisers can democratise access to professional financial advice.
Self-service financial tools and platforms are also on the rise, providing clients with greater control over their investments. These tools are becoming increasingly sophisticated, allowing individuals to manage their finances with greater ease and confidence. However, while self-service options are abundant, they cannot replace the nuanced and personalised advice that professional advisers offer. To remain relevant, advisers need to position themselves as invaluable resources who can provide more than a digital tool can offer.
One of the key advantages younger advisers have is their inherent familiarity with technology and digital communication. This approach not only attracts new clients but also fosters a sense of trust and community. Moreover, technology can help advisers stay ahead of market trends and client needs. AI-driven analytics can provide deep insights into market movements and client behaviour, enabling advisers to offer proactive and informed advice. By staying ahead of the curve, advisers can help clients navigate the complexities of the financial world with greater confidence and success.
The impending retirement of a significant portion of the financial advising workforce presents a unique opportunity for younger advisers to step up and redefine the industry. By embracing
technology and AI, they can manage larger client bases, offer more flexible fee structures, and provide superior service. The future of financial advising lies in the hands of those who can blend technological prowess with personalised service, ensuring that clients receive the best of both worlds. In this evolving landscape, the game of advice is no longer just for the old; it is a dynamic field ripe for innovation and new leadership.
