Employing hybrid advice in intergenerational planning

One of the growing topics of debate amongst financial advice firms is how to attract the clients of the future. In recent years most advice firms have been enjoying a steady income from the baby boomer generation but, of course, no generation lasts forever and at some point, the wealth is going to be either spent or passed on. Estimates are that in the UK there is around £5.5trillion1 (some estimate much higher) due to be passed from the current older generation to the next and/or subsequent generations in the next thirty years.

The question is, will the wealth that is passed down continue to be managed by the firms who have served the older generation? It is to be hoped so but, of course, there are no guarantees.

Younger, more tech savvy generations have far more information and data at their fingertips than their parents and grandparents. They are likely to be more comfortable researching and making financial decisions using available technology than previous generations.

The large financial services companies have realised this and are moving into the market. We only have to mark the recent entries into the digital advice market from big name players such as J.P. Morgan (in its purchase of Nutmeg) and Vanguard bringing its successful US strategy to the UK to see how the market is moving.

These moves may also have been spurred on because of the pandemic, which would seem to have accelerated familiarity and comfort with digital finances and a realisation among a wider proportion of the population that they need to be planning their financial futures and they need some helping doing so.

The new paradigm is about capturing the clients who are on the first or second stages of their financial growth curve and the potential wealth inheritors of the future and giving them the channels they need to manage their growing wealth in the way that they want. It’s winning the investors and savers who will be the wealth accumulators (and feepayers) over the next 30-40 years.

There is another side to this too, in that intergenerational wealth is not just about clients. Advice firms must have a clear long-term plan for growing and maintaining their business if they want to keep their younger advisers with the business. Why stay and work for a company that you can see will be losing older clients year on year and shedding its assets under management as younger generations take their money to other firms where they can get the options and choices that suit them?  

Food for thought?

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Threats and the opportunities

So, how should advice businesses be responding to the threats and the opportunities that this intergenerational wealth transition presents?

The good news is that, as mentioned, the uncertainty caused by the Covid-19 pandemic has brought home to more people the need to address their financial affairs and their financial future and boosted the reputation of financial advice firms. Demand for financial advice among the under-35s, for example has risen in the wake of the pandemic, with a recent survey by The Openwork Partnership2 showing that 23% of under 35’s say they would value financial advice going forward.  

But they are going to want financial advice on their terms –and at a price they can afford.  

This is where hybrid advice can deliver for adviser firms. Using digitally enabled technology, that combines automation and digital processes, to help bring clients onboard, with the option or progression to have contact with an adviser, means clients are able to interact with the advice firm in the way that best suits their needs at the different stages of their wealth accumulation journey.  

Offering choice in terms of the assistance they can receive from their financial advice provider – basic help, guidance or full advice – and how they receive it can open up financial advice services to this new wave of investors and savers.

As an example, someone who is looking for pension guidance, may not want, need, or be prepared to pay an adviser. However, they may open to being taken through the advice process of a trusted and established advice firm using techniques such as chat bots to help with explanations and guide them in the right direction. The same can be true of someone who wants to use their ISA allowance or wants help with regularly investing into an investment portfolio. Such a journey can be set up so that it can be easy to follow and is aligned to the advice firm’s investment or pensions policy.

This self-serve guidance is affordable to the client and can be operated with very little input from the advice firm, making it a profitable addition to a full-advice service.

For clients who want or need more than basic guidance but who do not need full advice, a hybrid, digitally led service can also be established for them, using similar techniques to help clients through the fact find and onboarding process and provide two-way communication with an adviser when needed.

In this way the hybrid advice model can deliver the right interaction for the individual client, while saving time on core processes.

For example, firms automating fact find creation have saved 30-45 minutes of advisers’ client-facing time and suitability report writing has been shortened from 6-7 hours to 35 minutes.

On a broader scale, we’ve been able to reduce end-to-end advice processes from 35-50 hours to 9.5 hours. This creates more time for the adviser to focus on the client and their long-term goals and aspirations.

From an operational perspective, providing a hybrid service, the financial advice firm’s processes can be more efficient, cost effective, and so more profitable. In addition, no matter how the client interacts with the advice firm there is a consistent and compliant approach, aligned to the firm’s advice policy, with integrated technology.

Hybrid advice is opening new channels to the mass and high net worth clients of tomorrow and the future. We believe, capturing these clients as soon as possible will be essential for financial advice firms looking to their long-term future.

1  https://www.kctrust.co.uk/wealthtransfer

2 https://www.theopenworkpartnership.com/news/advisers-deliver-significant-benefits-for-millions-in-the-pandemic/

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