An article by independent consultant Malcolm Kerr caught my eye recently. Upbeat and optimistic about the future, he raised a couple of really good points.
One that will no doubt resonate with many advisers is whether they should increase their fees, contrary to the current perceived wisdom that fees are only likely to fall.
His reasons for this are two-fold:
Costs for advisers are rising: fees for mandatory services, such as PI cover, FCA, Financial Ombudsman Service and Financial Services Compensation scheme are already significant and only likely to increase.
The market is operating at capacity and the pandemic has resulted in increasing numbers of people looking for independent financial advice. Using the general rule of supply and demand, it’s not unreasonable for costs to go up.
Malcolm quotes research from behavioural finance experts Oxford Risk. They found that 16 per cent of people aged 18-34 with stock-market related investments and savings took more professional financial advice during the coronavirus crisis than they would do normally. This compares with just six per cent of investors in general who did this.
According to the research, only two in five of investors aged 18-34 said they had not taken any professional financial advice during the crisis, compared to three in five of all investors.
This is interesting as the general demographic for the majority of advisers is considerably older.
It highlights that there is appetite from younger investors to seek the wisdom of experts. Could this be because of inheritance? Sadly, it’s likely the inter-generational wealth transfer could well be accelerated by COVID. Or could it be driven by the emergence of cryptocurrencies and a desire for potential investors to seek some understanding and reassurance before jumping in? Advisers are well placed to help steer fledgling investors away from putting all their eggs in that basket. If you are an adviser and have experienced this, I’d be really keen to hear from you.
A time for change?
We know that some advisers who manage investments themselves can be reluctant to consider changing because they believe it would push up costs for their clients and put pressure on their fees. However, it’s our experience that, once advisers understand the additional value that working with a specialist investment manager can add to their business and to their clients, these concerns melt away.
Talking of what clients’ value, last year we published the Insiders’ Guide to the Value of Advice, a white paper that has so far been downloaded by around 1,000 advisers and received excellent feedback.
I’d recommend any adviser, regardless of whether they plan to make changes to the way they work, takes a look at this. For those who are thinking about restructuring their offering, I’d say it was essential reading.
In spite of the impact on ‘business as usual’ of the pandemic (or maybe because of it?), perhaps this is the ideal year for advisers to look at how their businesses could be structured more efficiently for the benefit of both their clients and themselves.