There are eight events I firmly believe every business needs to consider and have a plan for over the next 18 months. These issues will impact on every advisory business, so ignore them at your peril.
What are these then?
Robo-advisors are digital platforms that provide automated, algorithm-driven financial planning services with limited or no human supervision. Typically, the Robo-advisor uses an online portal and survey to collect information from clients about their financial situation and future goals. They then use this data to offer advice and investment options for the clients assets.
Robo advice is a threat, as money management has become a commodity. Tougher disclosure rules, new technology, expanding public access to news and the availability of low-cost investment choices is starting to dull any edge professionals once enjoyed.
Inexpensive web-based asset allocation has accelerated this commoditisation. Robo advice when mainstream will address not only new millennial investors, for whom investing is just another online
experience, but also retiring baby boomers, for whom reducing costs is the most obvious way to preserve capital. As a result, many advisors may have to rethink their value propositions and upgrade
their practices to prosper in the future against this competition.
Removal of trail
The removal of trail commission proposed by the regulator in the recent FCA Asset management market study could hit the value of some advice businesses and see some experience financial difficulties. If firms are operating on slim margins already and they lose an essential element of their current revenue, then it is not inconceivable that this could be the catalyst that pushes some businesses to the point of failure. It will also be a major source of stress for many more. It is essential that firms have their plans in place before the FCA acts to reduce any potential impact.
Future of platforms
The FCA Asset management market study also announced that the regulator will review whether platforms enable retail investors to access investment products that offer value for money.
Despite the price reductions on platform charging in recent years, the FCA wants to look more closely at the impact on platforms on competition and value for money for consumers and, it is also suggested, a greater role for them in achieving these aims.
It will explore how 'direct to consumer' and intermediated investment platforms compete to win new and retain existing customers. This makes your right choice of platform even more important as is the due diligence you undertook to reach that decision.
Advice model of the future
Figures from a recent survey, which polled more than 15,000 investors globally, found that 76 per cent of UK investors would refuse to pay the typical hourly fee of £150 for financial advice.
On a positive note, the survey indicates that younger people are happier to pay for advice than their older counterparts. Only 17 per cent of millennials rule out paying for financial advice and nearly 20 percent are happy to pay a rate of £150 per hour or above.
Advisers must now ensure their proposition, advice structure and charging models are fit for the future.
Proving the value of your advice
On the subject of Millennials, proving the value of advice to and for them will be a challenge.
Good financial planning decisions extend well beyond where and how you invest. The true value of advice is when a client’s goals and aspirations are identified and supported by a plan that provides financial stability and growth for the future that can nurture these goals and deliver these aspirations.
Unfortunately, too many businesses use the field of dreams service proposition; what I mean by that is they believe just because they have built what they think is an attractive service proposition that clients will purchase from them and be happy to pay for this product or service. But this is real life, not Hollywood and just because you have built it does not mean they will come or more importantly pay for it!
Millennials have a different way of absorbing information than their parents and grandparents, they want someone to work with them as a financial coach allowing them control over their lives.
To future proof your business, Advisers will need to ensure the value of the advice they offer is millennial proof.
General Data Protection Regulation
The General Data Protection Regulation (GDPR) is the biggest change in data protection laws for 20 years, and when it comes into effect on May 25th, 2018, it intends to give European citizens back control over their personal data. Its impact won’t just be felt in Europe though, as it will have wider implications for companies across the world that hold data on the continent.
While great news for individuals, it presents complex problems for companies. As a case in point – they could face large fines, if they breach the new directive. With that in mind, Glassagh Consulting will be providing you with regular updates to help you understand what it means for your business.
Mifid was introduced in 2007 to harmonise securities trading and financial services legislation across the European Economic Area. It was agreed that Mifid would be reviewed after three years, the result is a new tranche of legislation, dubbed Mifid II, currently scheduled to be implemented in January 2018.
The key issues for advisers surround:
This is one every advisory firm must watch and we will look at this in more depth in the next few weeks.
The end game
You've spent your career building your advisory practice from the ground up. You have a database full of loyal, regular clients and the business is still growing. You're starting to think about retiring from the business and either selling it or passing it on to a family member or colleague.
There's only one problem: you are inextricably entwined in the business. Clients want to see you, not someone new. The challenge for many advisers will be how do they monetise and then exit the business they have built up.
This must and should be done well in advance of any sale. Tactics such as a marketing database, effective segmentation and succession planning are vital to ensure you receive the value you want from the business you have built.
These eight issues are vital for every advisory business and Glassagh Consulting will be here to help you through each of them with guidance and tools to ensure you are ready for the future of advice.
John Joe McGinley Glassagh Consulting August 2017