Scottish Widows’ third annual Paraplanner Survey takes the pulse of the paraplanning profession in today’s financial services industry. Focusing on regulation, technology, and the profession’s future, the report highlights how paraplanners are adapting to meet the demands of an increasingly complex and tech-driven environment. Ross Easton, Head of Platform Services, Scottish Widows, examines the results and gives us all the important insights.
In an increasingly regulated and technology-driven environment, we wanted to understand the challenges faced by paraplanners, who play an essential role in helping financial advisers deliver results for clients. This is now the third annual Paraplanner Survey we have conducted, and it serves as a temperature check on the health of the paraplanning profession. It provides insight into the increasingly crucial role that paraplanners play within the advice value chain. In this year’s report, we chose to focus on three main themes which, from our conversations with paraplanners, had been top of mind for them: the impact of regulation, the role of the paraplanner, and paraplanners’ relationships with technology.
What actually is a Paraplanner? How has the role evolved over time, and what is next for Paraplanners?
In essence, paraplanners act as the backbone of the advice process, helping advisers deliver accurate and comprehensive advice. The role is primarily focused on the technical, regulatory, and administrative aspects of financial planning, allowing financial advisers to focus on client-facing activities.
In the last decade, paraplanning has shifted from being an administrative black box to the academic and technical engine fuelling financial advice. It is now rightfully viewed as a distinct profession in its own right rather than just a stepping-stone to becoming a financial adviser. Obviously, this remains a possible career route for paraplanners, but it is no longer the default path for career progression. According to our research, only 18% of paraplanners see themselves moving into a financial adviser role in the next five years, with an overwhelming 69% looking to progress either within their current role or taking on a team leader position. It’s clear that given the current regulatory environment and the flux we’re seeing in the profession, now more than ever, paraplanners are playing a vital role in supporting and contributing to the advice process.
Our research also showed that paraplanners are valued more highly by their firms than ever before, and the vast majority of those surveyed felt that they had a positive relationship with their advisers.
How has regulation (CD, MIFID, etc) changed the role and responsibilities of being a Paraplanner?
Regulatory changes are having a bigger impact on paraplanners and their roles. 70% of paraplanners we surveyed believe that frequent changes to tax policy and allowances are having a larger effect than ever before on their business processes.
For instance, the changes to the Lifetime Allowance (LTA) came hot on the heels of Consumer Duty implementation, and our survey showed paraplanners felt they were poorly communicated. Our research revealed that many felt they weren’t given the necessary information and time to give clients the right advice about LTA. This regulatory change had a direct impact on workloads as the industry raced to deal with changes to the LTA. However, some paraplanners also felt the changes had a positive impact on their ability to deliver value to clients.
Greater complexity around pension regulations may increase advice firm workloads, but it also reinforces the need for advice and allows advice firms to better demonstrate their value add.
What are the opportunities or challenges that Paraplanners face with the introduction of AI specifically? What new skills will Paraplanners need to adopt?
Paraplanning and technology go hand in hand; paraplanners are undeniably the principal users of technology within advice firms, with the majority using two or three platforms regularly, as well as several systems and tools.
Contrary to what the doomsayers may believe, most paraplanners we surveyed do not think AI will replace them, with 64% of paraplanners now saying AI tools will be useful in their role compared to only 42% in last year’s survey. This rises to 84% when we look at paraplanners aged 30 or under.
The scepticism that can be observed around AI seems to stem more from concerns regarding the risk of errors and the lack of human touch. There is greater recognition that AI cannot, at least in the near term, replace what paraplanners currently do.
Additionally, our research shows that paraplanners want greater levels of automation and integration – both of which can be delivered by adopting AI. With the emphasis on value for money mandated by Consumer Duty now integrated into advice firms’ day-to-day work, AI tools can present an opportunity to go above and beyond in providing even better value for clients.
AI has the potential to give paraplanners a competitive edge and increase capacity in the advice market, so it’s important that early adopters are supported with the right technology and training.
What will the Paraplanning role look like, or will it even still be there?
The role of the paraplanner is not going anywhere. On the contrary, our research shows that paraplanners are taking on more responsibilities within their firms and feel more valued by their advisers than ever before. Paraplanners are adapting and learning to embrace technology, in particular AI, as a way to make their jobs more efficient and streamlined. The profession has a bright future ahead of it.
What is in store for financial services as a whole?
The financial services industry is an ever-evolving landscape due to regulatory changes, technological advancements, and the shifting needs of customers. Certainly, consolidation is on the agenda in the retail wealth space, and we think advisers will be looking for stability and financial strength when it comes to selecting long-term partners. Nevertheless, to predict how the industry will have evolved in 10 years, you would need a crystal ball. In the absence of one, our priority remains firmly focused on supporting advice firms in dealing with change but also enabling them to scale their businesses. This means taking friction out of their processes, integrating back-office systems and tools into our platform, and allowing them to work as efficiently as possible for the greatest number of clients.
