Normalising financial advice

The shockwaves are evident - according to our own Working Late Report, for example, 86% of current employees want to retire at or before 65, but only 37% believe this is financially feasible.

This is non-trivial as worries about financial futures have been found to impact the workforce significantly - for example, according to Scottish Widows' 2017 Retirement report, one in six people have suffered mental health issues as a direct consequence of financial worries. 

In addition to the obvious employee care issues this highlights, from a business' perspective, this can also negatively impact productivity. This is an issue of concern reinforced by the human resources sector where 26% of HR professionals recently cited ‘lack of savings for retirement' as the most significant factor affecting their employees' performance.

It makes sense therefore that this is the right time for the advice sector to help address these issues and revitalise a nation that, for want of a better word, is currently in a state of ‘panic' about their retirement. 

The answer is to make advice the norm.  We know people - and especially employees - are crying out for help.  Again, our Working Late Report shows there is a growing consensus, particularly from younger workers, that employers ought to support employees in managing their finances. We found 49% of respondents aged over 55 agree employers should be required to ensure the financial stability of their employees in retirement. This increases to 59% among those aged between 18 and 34. 

To ‘normalise' advice, the sector must do two things - first, help to educate the nation advice is accessible, affordable and reliable and, second, adopt a new model that is able to cater to a new type of client at the lower end of the savings scale.

Typically these people could have a pension pot of less than £150,000 and, just a few years ago, this would not have been economically viable for the average financial adviser; as the work involved could not deliver the required margin to meet targets. 

With the advent of technology and the growing appetite for robo-advice and automation, however, advice businesses could be facing a rosier future, where potentially much higher gains could be made. 

Yet that is only if they adopt new ways of working where advisers are supported by automated systems, designed to scale operations through the automation of fact-based journeys and quotation systems, enabling advisers to spend more time advising more clients. 

And when we look at what is happening in the sector - with just some 24,000 advisers yet 500,000 people retiring in the UK every year, combined with increasing complexity and regulations around savings, tax and income - there really is no choice but to focus on more efficient ways of serving clients and driving scale. 

The use of technology is the most obvious way to achieve this while also serving to liberate the adviser from minutiae and, in turn, re-engaging the nation in retirement savings by democratising advice for the masses.

In general, the advisory sector and financial planning as a whole has been relatively slow to adopt robo and automated technology.  In most of our lifestyle planning, we now accept and embrace technology and ‘robo' driven solutions - whether booking a holiday or travel trip with the likes of hotels.com, buying insurance for the house or car with comparethemarket.com or simply buying a myriad of online purchases via Amazon.com.

We can now instantly review, source, select and receive goods and services from these trusted provider examples at any time of the day or night, seven days a week.

It would be tempting to categorise these lifestyle technologies as separate to a more sophisticated transaction such as financial advice - however, what is important is clients now expect a level of technology and digital support to accompany their every transaction. This is especially true if it can deliver advice solutions that are affordable, efficient and compelling.

Significant Disruption

In the same way, taking no action can significantly disrupt a sector overnight. From a B2B perspective, consider sites such as Fiverr, which has revolutionised access to cost-effective consultancy services, forcing design and marketing agencies to reconsider how they work and charge for their services.

With such a backdrop, it is the right time for the advice sector to focus on the advantages robo-advice and further automation can deliver for their business and their advisers. Automating more, especially at the lower end of the savings scale, will naturally drive ‘cost to serve' down, enabling businesses to drive more volume while managing compliance and risk through the use of robust algorithm-based technology.

At the end of the day, it is still up to the individual to decide whether to go for advice, but this will only happen if, as an industry, the sector makes advice the norm rather than just a choice. Is it our moral duty to help the nation out of the pension and savings crisis?  Maybe not - but it is definitely the right thing to do.  

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This article has also appeared in Professional Adviser