In this blog for IFA Magazine, Fabian Wiesner (pictured), Head of Distribution Partnerships, SimplyBiz, dusts down his crystal ball and outlines why he believes 2024 is set to be a year of change for the financial advice community whilst helping clients remains front and centre
As the first month of this New Year comes to a close, it still affords us the opportunity to operate with a fresh slate and look to what remains of the year ahead with planning and curiosity in mind. It also allows us the opportunity to look at the year just gone and evaluate the trials we faced, and the choices we made in the face of our hurdles. In my case, why is there dust on my static bike?
2023 may have felt like year of planning and waiting, with regulatory changes looming and guidance needed on what advisers must do to satisfy these new requirements. We saw the landing of Consumer Duty, the promise of findings from the Retirement Income Thematic Review, eventual guidance given on the Sustainable Disclosure Requirements, and the introduction our new labelling regime. Markets were volatile, cash became king (to some), Artificial Intelligence broke onto the scene, and – consequently – fund performance seems to have been primarily driven by seven stocks. Inflation was on the tip of everyone’s tongue and Central Banks globally were scrutinised; every word spoken aloud was dissected to decide if the tone was dovish or hawkish, with many trying to find glimpses of positivity to work from, hoping the dial hadn’t been turned enough to break the world as we know it.
The future’s bright…
2023 wasn’t an easy year to be an adviser. But good news everyone – we can now shake off 2023 and look ahead. With our target market segmentation, and our robust and repeatable hats on, our foundations are set to get back to doing what we enjoy most – helping clients. 2024 promises to be an exciting year, not without its risk mind you, but exciting none the less.
Through 2022 and 2023, we saw the rise of cash, and clients seeking shelter in cash, some without the understanding that while +4% seems attractive, in real terms many were still losing out on purchasing power, and subsequently they lost out on what was a volatile, but broadly fruitful, year for fund performance. As things are seemingly going, 2024 could be the year where this cash gets set to deploy itself into the market. The natural question clients have is next will be “what do I do with this cash now?”
Risk vs reward
Some clients, those that are still building their wealth, are happy to take on volatility with the caveat that they are rewarded handsomely for the risk they take. However, most clients rely heavily on advisers to make sure that their risk appetite is matched with a fund that is appropriate. They also expect their funds to stay at the same risk level year on year. As we all have experienced, this isn’t always the case. With volatility increasing over the past year couple of years, I’m sure many of you have walked into an annual review with a client to find that the risk profile 4 fund that you had originally recommended has somehow started looking like a risk profile 5, 6, or even a 7. It’s not a pleasant surprise.
More options for funds that have been scrutinised and reviewed are available now than have been previously. Also more accessible are solutions through which investment managers have agreed to be consciously aware (and even wholly adopting) an SAA that is optimised for risk vs return by risk profile, holding the fund managers accountable for the choices they are making within the portfolios, and looking to ensure that your clients risk profile 4 fund stays at risk profile 4 throughout the year.
We await the findings from the Retirement Income Thematic Review, which could see some shift towards a new way of advising those clients in/at retirement. The FCA has promised to publish the RITR findings in Q1 2024. There is divide on whether this will mark the start of new regulatory guidance, or if the finding will be published as a best practice guide. Either way, the RITR shows the focus of the FCA on ensuring there is a difference in approach and investment choice for those clients that are in/at retirement. Since the adoption of pension freedoms, we have seen PROD and Consumer Duty which have made it clear that goals and objectives should be the focus, not necessarily just outright performance. Luckily, there are more solutions reaching the markets to help make these goals achievable.
The new ESG labels will start to make an appearance in the second half of the year, like a little label of nutritional information on the side of your fund. Thankfully, this will be making life easier for those clients that feel so inclined. The introduction of the fourth category, Sustainability Mixed Goals, is a welcomed addition, potentially allowing more choice for those clients that do want an ESG tilt, but perhaps aren’t ready to commit to impact investing. Over the first half of the year, we are sure to hear from all investment managers about how they will look to adopt these labels, and their reasons for doing so. We’ll all get ahead of the curve by taking the time to listen in and understand the options before they land.
2024 looks like it will be a year of change. Change in process, change in appetites, maybe even a change in governments, however, all that planning in 2023 will mean you’re ready for whatever 2024 has in store for you.
