This is the place to be for the next decade
Are we about to enter a fantastic decade for financial planning with good reason to be optimistic about the future of the profession? ABR sought the opinion of three business owners
The UK is growing increasingly pro-financial planning and the next decade will be one of the most exciting and dynamic for the industry, according to Chapters Financial Director Keith Churchouse.
A combination of government regulation, longer life expectancy and developments in technology have made consumers much more aware of the need to take control of their money and plan for their future, he says.
“There is growing support for financial planning as consumers become cognisant of the need to look at the bigger picture and are being actively encouraged to seek advice.”
Churchouse believes that after several years of negativity and bad press surrounding financial services, the industry is staging a return to its 1980s heyday.
“In the 1980s there was a real feeling of support for the financial services industry, with Margaret Thatcher establishing the City of London as a major financial hub and the sterling doing so well. Since then, the industry has suffered a series of calamities and scandals, with each and every one seemingly another nail in the financial services coffin,” he says. “However, we have emerged from recession, wealth in the UK is growing and the overall feeling is much more positive.”
Churchouse cites a rise in the profits of financial services companies as proof of its growing popularity. “There are an increasing number of companies in this space, and their profits are growing at significant rates, thanks to a surge in consumer interest.”
He believes the turnaround in public perception is in part down to a government push to raise consumer awareness of financial responsibility, with the introduction of auto-enrolment and the recent pension freedoms.
“The demographic of the UK is changing; people are living longer and therefore looking to hold on to their money for longer. Auto-enrolment has been crucial in turning the spotlight on pensions, affecting millions of people who may previously not have given their retirement much thought.”
Anna Sofat, managing director, Addidi Wealth, agrees: “There is more debate and dialogue around pensions and people are realising that they can’t rely on the state pension and need to make their own provisions. Life is growing more complicated, with more layers to consider, so there is a much greater need for a sound financial plan.”
As such, Sofat says advisers re now more involved than ever with their clients’ finances and the industry is working hard to highlight its importance to the public: “Advisers are now much more involved with their clients; with the introduction of platforms I would say they have become crucial to the distribution model.
“Bodies such as the Institute of Financial Planning have done a wonderful job in promoting the benefits of financial planning and attracting quality advisers. This is a profession to which people are increasingly turning as the advice model becomes more appealing than the traditional sales model. We will see certainly see financial planning grow in prominence going forwards.”
The regulator is partly acted as a catalyst in this, with the Retail Distribution Review seeking to inspire confidence and trust in consumers. While advisers might consider RDR old news, the key messages behind it are continuing to impact public perception.
Dennis Hall, CEO, Yellowtail Financial Planning, says: “Clients didn’t want a discussion about the merits of fees versus commission; they simply wanted to know how much they were expected to pay for a particular service. RDR, with its emphasis on transparency, fees and qualifications, has certainly helped establish financial planning as a more respected profession.”
While Hall believes financial planning is still a cottage industry, whose development will be gradual, he says a change in the language used to engage with consumers has created greater understanding of what financial planners do.
“A lot of the words used in our industry, such as ‘cashflow modelling’ mean very little to clients. What they do understand is the term ‘decent outcomes.’ Now you open a weekend paper and there are whole money sections dedicated to helping consumers achieve these outcomes which in turn is helping to heighten interest and engagement with financial planning,” he says.
The future of financial planning
Hall believes future growth will be reliant upon a divide and conquer strategy: “A lot of firms still operate within local communities and it’s about gaining trust and support from those clients.”
But Churchouse says financial planners’ reach is spreading thanks to the rise of the internet. Access to low-cost financial planning sites such as SaidSo.co.uk and consumer-facing websites like Vouchedfor allow advisers to stick their head above the parapet.
“The next 10 years will be extremely exciting for financial planning. We now have a personal finance champion as our pensions minister, the banks are leaving financial planning to financial planners, I don’t believe we will see a recession until at least 2024 and there is an understanding among the public that we can help to make their financial futures better,” he says.
Churchouse believes the gap between financial advice and financial planning is narrowing as more people realise that it becomes difficult to make a decision on one without consulting the other.
He says: “Financial planning is the place to be for the next decade and we are investing in our business in anticipation, as I imagine many others are too. I would wholeheartedly encourage people to pursue a career in this industry as it will be extremely dynamic. It’s the new rock ‘n’ roll.”
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