As the advice industry matures, the ways in which clients are serviced is expanding and robo-advice is becoming a reality for many large wealth managers.
Where does that leave the more traditional financial advisers, who are dealing in a competitive world where the noise for consumers’ attention is loud?
The fear that robo-advice will completely replace face-to-face financial planning is, of course, overdone, but it’s likely that some clients will be using this service, especially those at the lower end of the asset scale.
It is inevitable that some consumers will be put off by the cost of advice, and so seek an alternative option to meet their needs. However, I believe that the adoption automated advice is unlikely to be wealth-specific.
On the other end of the portfolio scale, those who are confident to make their own financial decisions may also access ‘robo-advice’ services.
The challenges that high net worth individuals face in managing their wealth range from the complexity of investing to working with multiple providers (banks, asset managers, accountants, lawyers, insurance agents and so on), to the complications of estate and tax planning.
So while a financial adviser may take on some of these responsibilities if technology can make some of the others easier, ‘robo-advice’ could offer a solution to some individuals.
Threat to opportunity
It may be that the threat of robo-advice is turned into an opportunity, with services like Advicefront, launching next year, claiming to automate “low value” work for advisers to help them work faster and enable them to focus on areas where they add most value.
This is a benefit for forward-thinking firms to improve their focus and free up resource which can be achieved through tie-ups with other professional service companies, such as lawyers and accountants.
Managing the wealth of individuals and businesses inevitably involves crossover and overlap between the responsibilities and functions of different industry professional services firms.
To take an example, the new inheritance tax £1m threshold – accountants, lawyers and financial advisers have all been involved in interpreting the rules to ensure that savers get the most from them.
With the competition to serve consumers increasing, it seems that now more than ever financial advisers need to be offering much more than the traditional services offered in the past and that may involve a link up with an accountancy or lawyer firm to expand the number of needs that they are able to satisfy.
This may be through outsourcing to use the technical ability or systems of another firm, or even marketing to increase the value of expertise offered to consumers, such as joint seminars providing deeper expertise than would otherwise be possible.
Of course, the challenge is where there is a common ground, there may be concern around client ownership and losing them to your partner in crime-come-competitor.
Who deals with each day to day business remit? Guidelines around the relationship between the other firm and your client base can safeguard this while still maximising the value from the tie-up.
Tapping into the services offered by other professional services firms may free up the resource for financial advisers to specialise in a particular niche or area or spend more time on other functions where they can truly prove their most value.
People need to plan for the future as well as the deal with the current financial issues today, but these are inextricably linked. So the breadth and depth of knowledge and services offered is more likely to not only lead to higher customer satisfaction but also inevitably stronger client loyalty.
We have seen link ups with accountants culminate in the acquisition of the firm by a financial adviser, and vice versa.
While this may or may not be on the long-term agenda, as the advice market becomes more intricate, raising the value and scope of the service offered to clients is more than likely going to be key to professional services firms’ success in the future.
Steve Hagues is founder at Retiring IFA