Beware the disruptors… they’re coming to get you

The summer holidays are always a good time to take a bit of time to reflect…whether about life in general or, more specifically if you are a financial adviser, whether your business is shaping up to your expectations.

The chances are that you are in a pretty good place. Much has been written about how the Pension Freedoms Act has created plenty of work for advisers with clients who have reasonable assets to manage. I certainly see no shortage of work for the advisers I’ve met over the past 12 months. Aside from the additional work required to comply with new regulations, life is good, right?

The risk ‘disruptors’ pose

Not wishing to burst anyone’s comfort bubble, I was struck by the sentiment of a recent article by Brett Davidson of FP Advance. In it he warns of the risk ‘disruptors’ pose in any industry and how no business should ever regard themselves as safe. Brett cites Toyota in the US as a good example but he could equally have mentioned Kodak and the impact of digital photography or Blockbuster, with digital streaming decimating its stronghold on the high street.

With automation increasing across all industries, it’s been surprising to see that robo advice has not yet taken off in the way it was expected to. The fact that the robo advice disruptors seem to be moving towards a fusion of automation and advice may change all that, particularly for those advisers who regard investment advice as their central service to clients (with a fee structure aligned to this).

Ignoring the less affluent is a risky strategy

Focusing on the Baby Boomers and their wealth and ignoring the younger, less affluent mass market could be a strategy that spells doom for advisers in the not too distant future.

I believe the firms most at risk are the ones who manage their investment portfolios in house and carry the overheads to match. How sustainable is that model as fees come under increasing pressure?

How relevant will these firms be once the robo disruptors get their act fully together? The advisers who will survive will be the ones who structure their businesses to meet the needs of the many, not the few (to steal a current political slogan) and those who offer far more than just advice on managing investments.