6th November 2017

Setting the Record Straight

Vince Smith-Hughes, director of specialist business support, Prudential

“Demand is far exceedingly supply when it comes to good financial advice,” or such is the view of Vince Smith-Hughes, director of specialist business support at Prudential.

Pension freedom has given huge impetus for clients to get out and seek advice but more complex, specialist areas such as defined benefit transfers, tax and estate planning are also giving advisers a lot of scope to offer their expertise.

Yet it sounds as though there are still not enough suitable advisers out there, so those already operating in the space should have their pick of clients. Or so logic might dictate.

Smith-Hughes said he recognises the sector-wide problem of a lack of fresh blood to the profession and suggests one route to solve this and narrow the advice gap might be for firms to bring in new entrants to manage a client base with simpler needs, where a level of automated processes are involved (he doesn’t like the term “robo-advice”, believing it to be widely misunderstood).

This works to address two issues. First, younger advisers are often better equipped to deal with younger clients or potential clients, which can encourage the whole financial conversation to start happening earlier in life. Second, if advisers are better matched to the clients they are looking after, the quality and longevity of the relationship are likely to improve.

He believes the exponential rise of technology-based solutions and automated services ought to be used to complement traditional advice models rather than as the oft-perceived threat.

“There is a genuine advice gap lower down the ladder. For those with savings pots of around £40,000 or £50,000 it can be more difficult to find advice, which may be where automated processes can help.”

The solutions need not be ‘all or nothing’; Smith-Hughes supports the partial automation of the advice process through the use of online tools and calculators  or online training sessions using chat forums and WebEx, which can cut down on time on some elements. This frees up advisers to add value where genuine human interaction, specialist skill and experience is needed.

But adviser reserve is real. In a recent survey conducted by Prudential, 40% of advisers agreed that robo-style offerings posed a threat to their current business model and 67% had concerns that it might not lead to the best outcomes for the consumer, or lead to compliance and regulatory issues in the future.

But with so many new ways of communicating with clients, advisers who are flexible in their approach may stand a better chance of engaging more clients, in a healthier relationship.

“Many clients are happy to go so far on their own but still want a sounding board at times. There are myriad different communication methods these days, from a one-off sense-check of their ideas to an occasional Skype chat or text-based conversation. Others will still warrant – and enjoy – an in-depth, face-to-face annual review.”

He says as the profession is becoming more robust and advisers more adaptable to change – they have evolved through the RDR, the need for more and higher qualifications, they’ve waved goodbye to commission on investments  - we have a much healthier industry all around.

“Take something like Pension Wise. Advisers can dovetail in with that and they can end up with a more informed client, which can save time.”

If robo solutions are not a major threat, things like the lack of longstop are; making the advice process more challenging.

As many advisers are running less transactional businesses these days, with cashflow models, outcomes-based solutions and overarching financial planning becoming more prevalent, as advisers increasingly specialise – often saving clients many times the cost of advice in tax alone in some cases – the outsourcing and partnering between advisers will different skillsets can make a lot of sense, especially with smaller firms.

“An adviser might decide they are not suitably qualified, or interested in, offering DB transfer advice and wish to outsource to another adviser.  The regulator seems to be recognising this and making its position clear to create a framework in which advisers can work with each other.”

The financial advice profession seems to be facing a major headwind; the challenge of cost-effectiveness and marrying that with ensuring the appropriate expertise finds its way to the right clients.

We face many unknowns right now. From the future of monetary policy and execution of Brexit, to geopolitical threats and the ever-mounting burden of regulation, so advisers need to know that when it comes to concerns that look a little more predictable - understanding the cost of running and growing your business, finding marketing support, helping with due diligence or the need for continual professional development - Prudential is here to help with a host of support available:

• Knowledge centre – for CPD and support on growing your business
• On due diligence
• Tools and calculators

By Sam Shaw

Partner Lead Story, Business Development