The Personal Finance Society (PFS), the professional body for the financial advisory profession, promises to “promote the highest standards of professionalism for technical knowledge.”
It was, therefore, a double-edged sword to hear at last week’s PFS National Financial Planning Conference that it is harder for advisers to earn fees yet the work involved to earn those fees is increasing.
Roy Bryson from Cap Gemini stated that consumers are only ‘willing to pay north of £100 for a genuinely differentiated proposition’. At the same conference, a large financial planning firm revealed the results of their analysis of their clients’ on-boarding process for which they had calculated the amount of time required to deliver a complete financial plan, from the first point of contact through to delivering a complete financial plan. The research revealed that this procedure took an average of 25 weeks to go through 164 processes.
The first point highlighted that on average, clients are willing to pay some money - but only for a detailed and strong financial plan. The second evidences the considerable time and resources needed to deliver such a plan. This begs the obvious question - how can advisers adapt their business models to deliver a strong proposition within the constraints of what customers are willing to pay and remain profitable? The answer undoubtedly involves embracing the progression of technology within the sector.
Advisers need to encourage technological innovation to future-proof their business, in the same way that they had to adapt their business to accommodate the Retail Distribution Review. For many, RDR involved the gruelling process of moving clients over to customer agreed remuneration.
Robo-advice needs to be welcomed as an integral addition to a financial advisory firm’s toolkit if it intends to deliver genuinely differentiated propositions within the expected fee and resource constraints predicted for the future.
Firms with the vision to embrace robo-advice will undoubtedly see that these advances in technology will deliver new business opportunities. Ultimately, they should help them to deliver advice to those market segments to which it would usually be too expensive to provide their full service proposition.
As always, the firms which will triumph in the face of adversity will be those with the foresight and wherewithal to adapt their business models in advance of any monumental change to the sector.