The financial advice industry was hit hard throughout 2020. Businesses had to adapt to the “new normal” overnight, and quickly rejig budgets to cope with the financial strain of the pandemic. The Financial Conduct Authority recently released the first of its Covid-19 surveys and found 4,000 firms that are at heightened risk of failure.
“These are predominantly small and medium-sized firms, and approximately 30% have the potential to cause harm in failure,” the UK regulator said.
But 2021 is a new year and there is a faint light at the end of the tunnel for the world to come out of the bleak lockdowns via vaccination.
Portfolio Adviser sister title International Adviser spoke to several members of the UK financial advice industry to find out what they feel about 2021 and what they want to see.
Dreaming of digital developments
In 2020 there were small signs of advancements such as video communication and digital signatures. But what do advisers what to see in 2021?
Tim Sargisson, chief executive of Sandringham Financial Partners, says there needs to be improvements by providers in providing client data to advisers.
“Systems with a number of companies remain too antiquated and are not fit for purpose,” he says. “In this day and age, collating and providing information is an adviser’s strength and probably greater than the actual provision of advice during these turbulent times.”
Neil Moles, chief executive of Progeny, adds that the sector should aim for a “hybrid” model which combines the “people-focused strengths of the traditional financial advice model with the innovation and scope of digital”.
“There should be a greater link between adviser technology and proprietary technology,” says Peter Mann, chairman of Radiant Financial Group.
“I would like to see providers and platforms making it easier to do business in a Covid environment, for example electronic signatures should be much easier to implement,” he adds.
But for Ben Rogers, financial planner at Equilibrium Financial Planning, there needs to be more in terms of “clear and simple financial education resources for young adults”.
Good communication will significantly enhance reputation
One of the biggest struggles for advisers during 2020 was keeping in contact with clients as much as they could remotely. As a result, many firms had to adopt technology into their businesses more than they had previously to keep it functioning.
The advice sector is expecting tech use to increase even more in 2021.
Sargisson added that he expects advisers to continue with “the changes they should have made in 2020 as the pandemic took hold”.
“Clients will continue to look to advisers to provide that ‘safe pair of hands’,” he says. “The need to communicate with clients ‘little and often’ in the coming weeks has never been greater. As I said right at the start of this pandemic in 2020, good communication will significantly enhance the advisers reputation.
“Whereas a lack of, or poor communication is likely to leave it irretrievably damaged. There is probably no middle ground. Ensure clients can access their portfolio remotely. Continue to accept that clients remain reluctant to arrange a face-to-face meeting over the next few weeks and possibly months.
“Many advisers I know still prefer this approach, but we must be realistic that this might not be an option for some time. Remote access provides an excellent way to communicate with clients.”
Moles said the start of the year gives an opportunity to reflect on what has worked well and from this, build the future of financial advice.
“We now have opportunities literally at our fingertips to deepen our client relationships and reach new client demographics by accelerating our adoption of technology and all the alternative communication options it offers.”
Common topics: tax, wealth transfer and ESG
There are a handful of subjects that are expected to keep coming up with clients over the next few months, one of which, Mann says, is changes in taxation.
“The UK has huge debt to pay off and the most logical place to start with paying it off is through tax,” he says.
Equilibrium’s Rogers singles out wealth transfer to future generations. “There has been a greater appetite to support younger family members sooner rather than leaving them everything at some unknown date in the future.
“Giving clients the clarity and confidence in their own longer term financial security has proven to be a gateway to exciting opportunities between multiple generations.”
Matt Cross, financial adviser at St James’s Place partner practice Oakway Wealth Management, says: “I think the only general conversation that I will have with all clients is around ESG.
“The majority of clients want to better understand ESG and what it means for their investments and their families’ future. For the clients that don’t bring it up, I will prompt the conversation.”
Expectations for the spring budget
One of the key dates in the diary for advisers is the spring budget. The next one will keep advisers busy as a lot of changes are expected, especially around tax.
The date for the budget is set as 3 March 2021, however, reports suggest that it could be delayed again.
Sargisson says: “I don’t believe there will be any material impact. It’s the changes heralded by the budget that create the impact.”
Progeny’s Moles adds: “Agility and flexibility will continue to be high priorities for advice firms as we navigate the months ahead. Whether that means adapting to a rescheduled budget or navigating the ongoing and changeable impacts of the pandemic, we will remain ready to support clients with the financial advice and support they need as we progress through the year.”
Rogers thinks the future of taxation looks unsettled as the industry waits “with bated breath” to see how the chancellor plans to pay for ‘whatever it takes’.
“Raising taxes or new taxes seems to be one of the ways with options of reforming capital gains tax and inheritance tax on the table,” he adds.
“Many in the industry have been proactive with clients who may be impacted, and a potential delay may allow even more time, and a new tax year, to get ahead of possible changes.”
Mann suggests a delay in the budget will result in increased speculation.
“There is already enough speculation about needing to introduce fiscal restraint measures and the longer the budget is pushed back, the greater uncertainty and more speculation there is.”
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