My Preferred Future For Financial Advice

What does the future hold for the financial advice profession? Here’s one potential version. It’s less of a prediction, more my ‘favoured future’:

Step 1: The NextGen group  grows as more and more young advisers see that planning and coaching are the skills that will differentiate them from the existing advice community.

Step 2: The current grab for assets under management (AUM) continues apace. More DB transfers, swelling the AUM of the advice sector. More companies sell out to consolidators.

Step 3: Pressure starts to increase on the sector of advisers who provide little or no ongoing service but continue to rake off their 0.5%. This pressure comes from the regulator, from the children of their clients and from automated advice models. These firms look to sell, often to the consolidators.

Step 4: The gap between the perceived potential sale price of a business and the amount of money actually in the bank at the end of the sale process finally becomes public knowledge. The real value of a client bank ‘owned’ by an individual adviser falls. More firms turn to proper financial planning in order to bolster their proposition and justify their ongoing fees.

Step 5: The financial planning community develops realistic succession planning and career paths, and so attract the best of the NextGen advisers. The growth of proper financial planning becomes more well known as it becomes more widespread, especially among the other professions who become envious of the trusted adviser status of the financial planner community.

Step 6: Those firms left who are still provide no ongoing service or planning wither as the clients die and their children have either not been engaged, or have already appointed a proper financial planning firm.

Step 7: Planning and coaching are the norm. The focus of financial advice is on helping people lead happier lives. Children once again get free milk at school. Politicians work together to find solutions for a better world and no longer shout insults at each other. And a unicorn is spotted prancing gaily in the Cotswolds.

I reckon this process (excluding the unicorn) will take around a decade to play through. Of course, there are other potential futures, where everything is dark and every person in the land has a model portfolio which magically beats its given benchmark on a monthly basis.

If we work on the assumption that my version of the future is preferable (and I appreciate that not everyone will agree with that statement), what do we need to do now to make it come true? I’d suggest the following would be a good start:

  • Develop meaningful succession planning business models to
    • provide exits for owners, and
    • provide something for young advisers to work towards, thereby attracting/retaining talent to the industry
  • Continue to shine a light on good practice so more firms realise the value of planning and coaching propositions
  • Greater transparency in the business sale sector, in particular on the real value of IFA businesses
  • Change the focus from sale of businesses for capital gain to creating a long term sustainable profit

There are other things to be done (every adviser firm to take on one apprentice?) and I’ve got lots of ideas. If you share my chosen vision of the future, what would YOU do to help us get there?

  1. Brett Davidson 4 months ago

    I like it Chris. With investment advice continuing to be de-mystified and commoditised the only future is one focused on planning and coaching. Helping human beings with behavioural and emotional issues is the one piece of the equation that can’t be Robo’d. Many good quality Financial Planning firms are actively seeking next generation advisers to succeed them. I’m working with four or five firms on this issue right now. Whilst client proposition, planning and coaching are central to the offering, the biggest hurdle for many great advisers is becoming skilled businesspeople. Success brings business related challenges; strategic direction issues, management issues, staffing and HR issues, technology issues, financial issues, leadership issues and personal effectiveness issues. To achieve this vision for ourselves as a profession, leading adviser/owners need to become the complete package. It’s an exciting journey. The other challenge I see is creating a brand for boutique independently owned Financial Planning firms. Big brands feel safe to consumers. If independent, high quality advice really wants to play against the large (often inferior) branded groups, this will need to be addressed. I’m thinking some form of marketing organisation funded by it’s boutique member firms. But can smaller firms ever agree on who and how to do it? That’s not a dig by the way. It’s just a very challenging issue because most small business owners are so independently minded. Joining such a a group and feeling comfortable with direction and decision making can be tricky. The next decade could be the most exciting yet in my opinion. Bring it on.

  2. Martin Bamford 4 months ago

    “Children once again get free milk at school.” Over my dead, Tory body.

    The rest looks pretty reasonable though.

  3. Tom Orchard 4 months ago

    I share your vision Chris. The asset management and product selection role of the current/older adviser model is the easiest part for the DIYer to take on themselves, or for the automated/hybrid advice models to pick up and run for a fraction of the price. Adding value in these spaces will only continue to get more difficult. Understanding the nuances of lifestyle planning in both the accumulation and deccumulation stages, plus coaching against human/investor biases etc is where I see the successful firms heading. The difficulty for older firms is knowing how best to make that transition.

  4. Rich Ellis 4 months ago

    I share your view Chris, as you well know. What can I do to help us get there? Well, the intention is to build a business that nextgen advisers want to join, where they don’t feel stifled or ignored. One where employees are rewarded not just financially but with ‘financial interest’ in the future of the company they help us build.
    Provided we don’t lose sight of this vision we’ll never fall out of love with what we do, in which case, why would we want to sell it?

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