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I spend a huge amount of time speaking with professional advisers and have recently come to an alarming conclusion. At a recent event Goji hosted in partnership with Owen James, amongst the usual debates over GDPR, fee structures and FCA compliance, one chore really stood out – succession planning. I use the term ‘chore’ deliberately. Succession planning is one of those ‘near future’ concerns that never appears pressing but, it turns out, every adviser is anxious about dealing about. Like the worst of chores.
More specifically, advisers know they need to think more about future-proofing their practices to succeed amongst the complex mix of social, regulatory and technological changes that will transform our industry in the near future. However, most aren’t taking enough responsibility for understanding these changes and preparing accordingly.
Do advisers know what the customers of tomorrow want?
Most advisers are aware that personal financial management is on the cusp of a technological transformation. But those I have spoken to recently are split about its significance. On one side is a group that believes their fee isn’t under pressure as long as they “clearly articulate their proposition to clients”. There is no significant threat to financial intermediaries as long as people continue to meet and talk to advisers. Technology can be used to complement and enhance the advice process but, since ‘IT’ is constantly changing, what you invest in now is “redundant tomorrow”.
It is perhaps telling that the more concerned advisers are about technology, the more they connect it with how their customer base will change in future. This second group understands that the face-to-face model “only serves a minority of the population”, exacerbated by the Retail Distribution Review and the cost of providing advice. Aside from being able to serve the children of current clients, these advisers know that they don’t have the language or expertise to communicate and attract new, young customers.
These advisers also know that threats to the traditional model are being commoditised. Robo-advisers are intuitively designed, digital-only and require small sums to open; all factors that attract millennials and mean this cohort may never value professional advice. Crypto currencies, alternative assets and Direct Lending, of which Goji is a leading provider, are better understood by young people than many professional advisers, particularly when incorporated in an ISA wrapper, a format that millennials are used to.
Of course, ‘digital transformation’ provides other efficiencies. Obtaining client data, updating clients who don’t need regular meetings, and reducing costs are key benefits. Indeed, picking the right technology is something that in itself causes anxiety and holds advisers back.
But there is a bigger succession issue here: Like other advisers, you may be cynical about the “short attention spans” and work ethics of the younger generation but we have to face the fact that they are the customers of the future. Efforts to articulate your value to them, in a medium they understand, need to be built into succession plans and currently, only the most forward-thinking advisers are considering this.
Can talent save us?
This trend is borne out in the foundation of succession planning – recruitment and training.
Many advisers believe that finding fresh talent will solve these problems by bringing in new skills and an understanding of how young customers work. But future proofing your business, when customer needs are so rapidly evolving, is difficult when you can “only recruit clones of yourself”, as one IFA said to me.
It is tough, for example, to find female talent and even tougher to find young talent from ethnic minorities. So how can advisers expect to remain relevant if their practices don’t reflect, or understand, new customers?
Again, advisers need to take more of the burden by upskilling themselves as part of succession planning. Recent conversations tell me that advisers don’t understand how apprenticeships work, don’t know whether there are any formal adviser training programmes to tap into, and are having to turn to law graduates in the absence of a willing supply of grads with finance qualifications. Those that take a lead on finding more diverse talent, whilst spelling out a clear proposition to sell their business to candidates, will create a big advantage for themselves.
Planning to succeed
Typically from the white, male, 50+ demographic bracket, IFAs recognise that they don’t understand what new customers want and how new technology will impact them. They believe new talent will save them, but don’t know where to find it. Yet at the same time, they aren’t taking the time to understand how the next generation approaches money and investing, interacts with technology, and expects companies and services to interact with them. My belief is that by taking on more responsibility to upskill themselves as part of their succession plans, IFAs will ensure their practices are future-proofed. Better understanding new asset classes and how technology can be used to provide a slicker customer experience are key to this. Otherwise succession will be left to chance.