With 2018 almost behind us, we look into our “proverbial” crystal ball to see what 2019 holds for financial advisers, their clients and potential clients. We ask the experts.

A theme which is likely to re-occur in 2019, is the need for financial advisers to connect with the younger generation.

“My view is that many small financial advisers are limited in how much they can cater to younger people, due to resources and regulation, but larger firms could and should be making more of an effort. There is a need to establish a relationship with future beneficiaries of inheritance – there is a huge risk that many young people will walk away from their parents’ advisory firms in the future, either because they don’t know or trust the IFA, they can’t physically visit them or they think they can look after themselves.

“Starting that relationship now could pay dividends. It could be as simple as asking younger people to sit in on inheritance planning discussions, or asking existing clients if they would like to add a small retainer on top of their usual fee to help their children.

“Technology is a big part of the answer – it could make this strategy financially viable for advisers but also young people’s financial needs are not that complex (relative to their parents). They may require more in the way of guidance and information.”

Iona Bain, founder of the Young Money Blog

Stronger support from advisers

“The industry will see ever-increasing support from advisers who for years have failed to invest in investment companies. A combination of regulatory issues like MiFID II, better education and access to investment companies means more support for them, either directly from advisers or from companies such as Smith & Williamson working alongside the adviser market.”

Mickey Morrissey, partner at Smith & Williamson

A greater focus on fees and liquidity

“Following RDR, investment management fees have been aggressively re-priced and aligned to the principles it was founded on in 1868: long-termism, a pioneering approach and a desire to help investors of modest-means provide for their future. The world may look very different today than it did 150 years ago, but these tenets are as relevant now as they were back then.”

Simon Elliott, head of investment trust research at Winterflood Securities

Education: still more work to be done

“The financial services industry needs to create simple-to-use, transparent products that help everyone secure their financial futures in the long term. We are particularly focused on helping millennials access long-term solutions to help them achieve their ambitious plans. Our studies show that two in three 18-to-35-year olds have ‘traditional’ life goals but half of them do not hold any long-term savings or investment products. We also know a quarter of this group want help or education with investing.”

Simon Fraser, chairman of F&C Investment Trust

Better retirement outcomes

“From next year product providers will be required to revise the information they give to consumers at retirement to promote better retirement outcomes. If the FCA recommendations are implemented as they stand, providers will no longer need to signpost consumers to regulated advice.

“Providers of drawdown plans will be required to offer default investment strategies to those seeking flexible access to their pensions and market comparisons of annuity rates to those seeking a guaranteed income. It is hoped that this will help avoid inappropriate investment choices being made and encourage shopping around.

“There is a danger however that it could cause many non-advised consumers to drift into flexible drawdown, dealing with each pension plan piecemeal and with no overall strategy for their retirement. Dealing direct with the provider, with which the pension plan has been built up, will incur no upfront fee for advice and could make accessing drawdown easier but it may not lead to better retirement outcomes in the long term.
“In 2019 the regulated advice sector has a choice. It can accept that many consumers will see advice as out of reach and ignore them, or it can gain efficiencies, via the adoption of technology, which enables advice to be delivered to the many at an affordable price.”

Kay Ingram, director of public policy LEBC

Regulation

“With MiFID and GDPR, there’s been a lot of regulatory change this year, and the impact of these changes will increase again in 2019. Regulation will step up a gear in the year to come. One impact that will be felt is the way that businesses communicate with their clients – for example, having to disclose their underlying costs in very specific and detailed ways.

“Estimated costs will have given for each new investment, and then at year end, the actual figures will now be presented to all clients. We should be sanguine about this. Clients understand there is a cost to receiving good advice and achieving their investment goals. They will know the rate of fee they have been paying. For some, however, seeing the quantum set out in print may prove a challenge.”

Phil Organ, Leodis Wealth 

Further reading on this topic:

How financial services must ‘go green’