Financial advisers in the UK are not broadening their services enough to cater to younger clients.
A report by Technical Connection, part of St James’s Place, on the future of financial planning revealed that younger demographics are being under-served by the advice community.
Just 20% of the average adviser’s clients are under the age of 45. Most (44%) fall within the 46-60 age bracket, followed by over-60s (33%).
The same principle applies to the attraction of prospective clients, with most efforts made towards those aged 51-65 for 63% of advisers, followed by 66-75-year-olds for 56% of respondents.
Only a quarter are looking at customers under the age of 35.
The reason for this trend seems to be mainly based on assets under management, Technical Connection found. Almost two-thirds of older clients have investible assets between £50,000 and £500,000; a further 16% have between £500,000 and £1m; while 8% have more than £1m ($1.2m, €1.1m).
The report also discovered a mismatch between what clients want and what advisers want. Customers expect more technology touch-points, while advisers would like to keep tech on the periphery. Technical Collection said this will cause an issue for advisers in the future as they will need to be “prepared to adopt a new approach”.
The lack of a common ground when it comes to technology may also be one of the driving reasons for leaving younger clients under-served as they are generally the more tech-savvy ones.
Personalisation
The report also found that, in terms of changes, clients seem to be demanding a more tailored service from their advisers, something that is going to be paramount in the attraction and retention of the next generation of customers.
Around 60% said they want to see changes in the way they receive services from their adviser. This rises to 73% for those in the 35-45 age group, and 90% for under-35s.
Yet, only about a quarter of clients have been asked by their advisers about what they value about their service and how it’s delivered, and whether they would want anything to be changed.
This seems to come in tandem with the role technology will play in the advice space in the not-so-distant future. The majority of advisers (81%) believe tech will, or at least is likely to, pose a threat to the traditional model, meaning that its adoption and adaptation must be timely in order to survive and progress.
Next-gen of advisers
But the financial advice sector is not only having problems with younger clients; there is a lack of fresh talent as well.
Technical Connection expects most current advisers to have left the industry within the next 10-to-20 years.
Three-in-five (60%) advisers do not expect to be actively advising clients in two decades’ time, while 35% believe they will leave within the next 10 years.
Surprisingly and worryingly at the same time, the vast majority of advisers that don’t expect to be working in the sector in the next 20 years (87%) do not have a formal plan in place to exit the profession.
This highlights the growing need to attract the next generation of advisers to pass on the baton to before the talent gap widens further.
Future-proofing
Tony Wickenden, managing director at Technical Connection, said: “Understanding what’s most important to the client, and keeping that at the forefront of the advice proposition, will ultimately lead to the greatest benefits for clients and the financial planning businesses supporting them.
“Combining knowledge of what’s possible and what’s important to the client is what will deliver all important Advice Alpha – namely the positive difference made to the client’s financial wellbeing by engagement of the financial planner. The future shape and delivery of financial planning strategy will be influenced by many factors, including the inexorable advances in technology in financial planning. It’s so important to respond to the needs and expectations of clients, especially younger clients and to enhance delivery efficiency.
“There is also the continuing uncertainty in relation to the future of taxation and pensions and the impact of developing regulatory change, especially consumer protection and the required commitment to Consumer Duty.
“In addition, the growing importance of paying proper attention to the many potential vulnerabilities of clients and the impact of financial decisions on climate and global wellbeing means that the profession has to seek a greater understanding of, and insight into, these powerful and important influences in designing financial plans that are appropriate for each client.
“One size absolutely never has and never will fit all, and efficient, appropriate integration of technology into the financial planning process is likely to be absolutely essential.”
