The Future of Wealth Management: Are we tackling an Investment Access Gap or Advice Gap?

The landscape of Financial Planning and Wealth Management is forever changing. The exponential rate of change faced by the industry is hinged on two major, yet intertwined, challenges that are the twin pillars of change moving forward: Legislation and Technology.??

Legislative changes in the industry are often seen as an opportunity, especially for Financial Planners. Tax changes bring the opportunity to add value and in a post-Consumer Duty world, that is essential, and the recent rumors around IHT abolition have created a lot of debate around the planning angles this generates. If Legislative changes are often seen as an opportunity, why then are technological innovations often met with friction???

Friction often centers around job security. Only recently, at the Chartered Institute for Securities & Investment's Financial Planning Conference 2023, Paraplanning was being discussed as facing huge threats from AI and Technology with some firms using AI already for more basic tasks such as top-ups. However, the introduction of new technology in Wealth Management, for advisers, fund managers and most importantly, clients, should been seen as an opportunity. Being able to harness the power of AI to provide lower cost Financial Planning and reduce charges around administration through the digitisation of process, enables our industry to be more accessible to the masses. Focusing back on Paraplanners, using AI to assist in writing and getting feedback on reports can massively reduce the time it takes to do tasks. A Paraplanner is still essential in understanding the client and ensuring the reports are personalized and bespoke to the client they know, AI is not ready to take that over just yet.??

There is no doubt in my mind that the vast majority of Financial Planners want to provide advice to as many people as possible, but they are restricted on the number of clients they can have, by time.??

To provide the best possible service to an investor, an adviser needs to be available, responsive, and reliable. For an adviser to do this in a compliant manner takes a lot of time and it is why a lot of advisers I speak to have been forced into restricting the new clients they take on. Now that may be a decision an adviser takes because they are happy with their workload and their income, but adopting technology to make processes slicker, reporting quicker and information more accessible can mean advisers can free up more of their time to do the thing they do best: advise.??

From a consumer perspective, the need for personalized financial planning is an interesting debate. Younger generations are not used to having personal relationships with professionals in the way Baby Boomers and are with their Banker, Dentist and GP. Instead, they demand instant access to information and don’t want/need to spend hours over a coffee with a Planner. A recent article in Money Marketing claimed 44% of adults look to Martin Lewis, The Money Saving Expert, for free access to advice, whilst Professional Adviser published a piece stating 1 In 5 18–34-year-olds would use YouTube as a free source of planning advice. Whilst regulations around free access platforms is a concern, the wealth management industry needs to realise this and provide a service that best fits the consumer, not fights against it. Digital, automated advice is not an option for advisers in the future.??

We have seen attempts to tackle this, but I feel they have been missing the mark. The efforts of Nutmeg, MoneyBox and more recently Monzo have all seemingly focused on product rather than objective. Access to investments seems the aim of the game for these major players. The demand is there. In the first two days of announcing Monzo Investments, the Moorgate based challenger bank received 200,000 sign ups. Staggering numbers show just how eager the younger generation are to grow their wealth.??

My concerns though are this is not tackling the problem. Digital access to investments has been around for a long time and Monzo is not creating anything new here. If investors want access to manage ISAs and GIAs through an online platform, then the market has a wide range of options and most of them far cheaper than the 0.59% per annum that Monzo are charging. When I speak to friends that are in their late 20s and are fortunate enough to have cash available to invest, the conversation is never around ‘how do I access investments?’ but more ‘what do I do?’.??

Consumers are not looking for more access to the markets, they are searching for low-cost advice in a system that matches their way of working. The traditional advice model struggles to provide this with Advisers largely unable to work with investors that do not satisfy their minimum asset requirements.???

Furthermore, enabling consumers access to the stock markets through their online banking app could pose more harm than good. The options through Nutmeg and Monzo require account holders to select their attitude to risk and this will then determine the weightings of equities and fixed-income securities held in their portfolio. Offering this choice to consumers who are constantly bombarded with the returns being supposedly generated in various get-rich-quick schemes on TikTok or in the Crypto/NFT world, naturally leads to electing for the higher risk approach. Enabling this with no understanding of the investors’ objectives or appetite for loss is a big worry.??

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The market seems to be tackling access to investments when it is access to advice that is the real challenge facing our market.??

There are businesses trying to tackle this. Various national firms like Quilter and SJP have launched robo-advice apps. Chip is another D2C offering, backed by P1 Investment Services, and Conquest Financial Planning have bought some amazing tools to the market after success in Canada that are enabling the digitization of Financial Planning for firms.??

Ultimately, we need to ensure FinTech firms in the Wealth Management space are focused on access to proper, FCA regulated Financial Advice to enable the generation set to inherit the largest transition of wealth ever seen are guided by their objectives and not by execution only access to financial markets. We need to tackle the advice gap.??