The key thing clients value from advice are trust and peace of mind, according to research conducted by Boring Money.
Together, these crucial elements were identified as providing around 26% of the total value of advice.
For advisers to effectively deliver this peace of mind, they need confidence their operational processes can cope with what’s thrown at them and that their suppliers will work with them, adapt to changing needs and invest in the future, too.
That’s something that’s been challenged this year across the sector.
Firms have been buffeted by persistent economic headwinds, political uncertainty and major policy changes. Inflation has strained firms’ margins everywhere from staff costs to energy.
The uncertainty of the general election, the bedding in of a new government and, most of all, the hotly anticipated first Budget of Labour’s current tenure has demanded additional resource from firms to review and adapt client plans, as well as time spent reassuring them.
We’ve also continued to see an ever-growing regulatory burden, marked most recently by the onset of Consumer Duty and particular scrutiny over the quality and consistency of retirement income advice.
Looking ahead, this pressure is only set to continue.
The Budget might have brought clarity over policy direction but it has also brought significant changes to savings, investment and tax policy, as chancellor Rachel Reeves works to fill that well-publicised £22bn ‘black hole’ (or £40bn including the extra department spending).
Helping clients deal with these changes will be critical, valuable but intensive work, adding to what might already be capacity crunches in some businesses.
Similarly, the government’s ongoing pensions review could start to generate new planning implications. And all of this comes amid the continuing cost-of-living crisis, which is increasing demand for support with cross-generational gifting to help family members and a cost of doing business that’s certainly not showing signs of decreasing any time soon.
Steps for resilience
Against this backdrop, there are some things we’d like to see happen to help strengthen firms’ operational stability – to help give them that foundation upon which they can deliver client’s much-valued peace of mind.
From a regulatory standpoint, Consumer Duty has been one of the biggest developments of recent memory and a challenge for some businesses. We need to see positive impact from this.
Additional guidance from the FCA on what constitutes great – and poor – practice could help give firms greater confidence and a clearer template for implementation, which naturally unlocks efficiencies in compliance and more optimism about the policy’s future. The regulator is currently reviewing annual board reports, submitted in July – the outcome of which could help in this regard.
Looking to growth
The new government wants to see the economy grow, with increased investment. Advisers are perfectly placed to support this, given they help clients who want to invest to do so with confidence it’s the right thing for them.
I doubt we will see direct support but the government could nonetheless extend a hand to the sector by introducing change in a controlled way which doesn’t give rise to excess work.
Rumours pre-Budget on caps on tax-free cash created a lot of client demand. Meanwhile, the issues we had with half-written rules on the lifetime allowance changes created confusion and extra work when it came to adapting and updating client plans.
Going forward, we’d like to see the government manage consumers’ expectations ahead of its Budget by emphasising the fact they won’t make retrospective changes to investment and tax policy. This is usually something that’s managed with transitional protections.
We’d also like to see a commitment to ongoing consultation with the industry on change. This would enable change – and its implications – to be fully thought through and mean any new intentions are communicated clearly, once.
In our hands
When it comes to operational resilience, we should always be looking for immediate solutions, too. Regardless of what the FCA or the government delivers, there are steps firms can take themselves to strengthen their operational foundations.
Perhaps the most obvious might be increasing emphasis on assessing financial strength when choosing suppliers; something that might be front of mind given recent withdrawals from the platform market and the consequent disruption this has caused for clients and firms alike.
This means scrutinising whether providers have the strength and scale to fully support their ambitions, and that they can be relied upon to deliver over the long term. Ratings systems, like those provided by AKG, can be a helpful point of independent guidance, as they look not just at the numbers but wider business strategy.
Looking ahead, then, despite significant pressures, the advice sector keeps delivering. Day-in, day-out, it continues to give clients that peace of mind that they so value.
Stronger operational foundations will only help this. We should continue to seek more support from policymakers and regulators. But we should also make sure we’re drawing on each others’ capabilities – and seeking the very best.
Alastair Black is head of savings policy at Abrdn
