Changing attitudes to risk
We’ve also all heard stories of a surge in interest in day trading and demand for meme stocks like GameStop and cryptocurrencies. At its annual public meeting at the end of September, the Regulator identified 2.3 million people currently invest in cryptocurrency. But at the other end of the scale, nearly 8.6m consumers are holding more than £10,000 of investible assets in cash. There is a considerable polarisation in the level of risk taken by those who don’t seek advice: some are potentially missing out on returns by being too cautious, while others are in danger of losing their money by being too adventurous. The fallout of the advice gap is that DIY financial planning has left many at risk of financial harm.
Factors such as falling cash interest rates, rising inflation and the impact of the pandemic on household finances are aggravating the situation. People have seen their fortunes change over the last eighteen months for both good and bad. Many have found they are accumulating ‘accidental’ savings that they don’t know what to do with, others forced to dip into their emergency funds for day-to-day essentials see the lure of high-risk investments as a possible solution without fully understanding the risks involved.
Against this backdrop, more people than ever would benefit from financial planning. So how can our sector close the advice gap and meet the needs of people who haven’t traditionally taken financial advice?
Closing the gap
Closing the advice gap isn’t going to happen overnight, but there are several steps firms can take to broaden their client reach. Not everyone needs full holistic advice right now, but many would benefit from a personal recommendation on part of their finances, which could lead to more complex financial advice in the future. The FCA flagged in its evaluation of the Financial Advice Markets Review (FAMR) that “simpler advice services could help to attract more consumers towards the help they need”. And more recently in its plan to tackle investment harm, it has promised to look at regulatory change to make it easier for firms to innovate in this area. Hopefully this will lead to more firms developing a wider range of propositions for clients at different life stages, with simplified offerings for those early on in their investment journey, to ‘full fat’ holistic advice for people at a later stage of wealth accumulation or with more complex financial needs.
And technology is a key part of the solution. Digitising part of the advice process may be an option, but for many firms, using technology to drive efficiencies and reduce costs within their standard advice offering could mean servicing more clients and more assets per adviser. The intelliflo eAdviser Index, which analyses firms’ use of intelliflo office functionality, finds that using technology to best effect can have a significant impact on the firm’s success. The most recent figures show that those who get maximum use of the system’s capabilities have 41% more actively serviced clients and 126% higher AUA than those who are not yet fully utilising the functionality on offer.
Most advisers aren’t short of clients, but being able to reach a wider pool of clients who build their assets with you will help safeguard your business for long-term success.
