How financial advice firms can do more for financial wellbeing in the UK and make a business case for doing so.

Financial wellbeing is a key issue and a responsibility for members of the financial services industry and it worries me that with investment ‘adverts’ prevalent on social media, people can easily be led down false paths or led to believe that they can make massive returns from products without being given the full picture around the risks they are taking with their money.

On the plus side, it is fantastic that more people are taking interest in their savings and realising that with inflation rising, holding money in bank and building society cash accounts is in effect losing them returns, in terms of buying power, and they are taking action to invest.

What is clear from this study, however, is that people need help and guidance in terms of where to invest and the benefits and risks involved.

We know too many people rely on word of mouth from non-experts, someone they know, friends or family, as to how and where to invest. This is because they know them and so trust them. Likewise, people are led by social media influencers, or convincing adverts. Yet the clear experts, the people investors should be trusting, i.e. financial advisers, are not even showing up on people’s radars.

In part this is because of the substantial advice gap that now exists in the UK. If you are starting on your investing journey, the simple fact is you are unlikely to turn to a financial adviser because of the fees involved. Financial advice is seen as only for the wealthy who have enough money to make paying the fees worthwhile.

But, what if there was a way for financial advice firms to serve lower value clients who are starting or already further along on their wealth accumulation journey? Those who need some simple help and guidance and could be served by financial advice firms with minimal if any involvement from a financial adviser? Which would keep advisers’ time for HNW clients – but also bring in new, lower value, wealth accumulating clients, as a new source of income for the business, and nurture them as the potential mass affluent/HNW clients of the future?

Financial advice firms are seen as trusted sources of expertise when it comes to savings and investments and using digital-advice technology, financial advice firms can easily and cost effectively serve a large proportion of the people currently in the advice gap – to the benefit of all.

Digital advice is giving advice firms the ability to offer different levels of service to different types of customers, supported by technology.

At entry level for the client, this can take the form of guided advice, where the client is walked through a digital pathway, fully aligned with the advice firms pensions and/or investment policies, with advanced algorithm driven chat bots used to ask relevant questions at each stage to help the client progress through the process. This provides a hands-off service in terms of adviser time and can suit clients who are looking to start investing and/or are happy to be guided in this way. It saves advisers’ time, clients’ time, and requires little business intervention.

Where the client maybe needs some more detailed help, the same digital process can be offered but with the option to speak to an adviser.

While those with sufficient wealth or whose needs are more complex, can be steered to the full-advice service.

Offering a digital advice service means clients can interact with the advice firm in the way that best suits their needs, depending at what stage they are in their wealth accumulation journey.

Using digital advice, there is huge potential for advice firms to serve a wider range of clients, increase their revenue streams, and improve compliance, while fostering their future clients in the process. The big-name players in the market are already recognising the capabilities of digital advice, evidenced by JP Morgan buying Nutmeg, and it will become more prevalent in the next few years but financial advice firms have a window of advantage as trusted experts to steal a march on the market.

And, importantly, the more people who receive expert guidance at the level they need it, the more chance we have of closing the advice gap and promoting far better financial wellbeing in the UK and Globally going forward. It really is a win-win outcome.

* https://www.aegon.co.uk/content/ukpaw/news/low_interest_rateshavepromptedhugenumbersofpeopletoinvestbutunre.html/

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