No matter how long you have been in practice, the financial advice profession will continue to present challenges. The ever-changing economic landscape of our times means that professional development never stops.
Those of us who have been in practice for a few decades will remember the days before online banking – just one of many sea changes that shifted our industry forever!
In today’s world, it has never been easier for your clients to conduct research, invest, transfer money, and build a portfolio that adds value for them.
Simultaneously, since the Covid-19 pandemic, market volatility and political shake-ups have shocked everyone’s financial circumstances and presented new hurdles for both clients and advisers to leap.
Here are five challenges that firms are facing in the next 12 months, and how to solve them.
1. The FCA’s upcoming Consumer Duty principle
Due to come into place in July 2023, the Financial Conduct Authority (FCA)’s new Consumer Duty principle will move to fully achieve their goal of outcomes-based regulation.
Speaking on this change, Sheldon Mills, executive director of consumers and competition at the FCA, told FTAdviser in January 2022 that often consumers are “not given the information they need to make good decisions”.
As a result, some changes your firm might need to make include:
- Appointing a “Consumer Duty officer” who will regularly review the policy within your firm
- Regularly reviewing client portfolios and addressing vulnerabilities
- Nurturing client relationships to ensure you are working towards positive outcomes.
In addition to structural changes, it is important to adjust your attitude towards the FCA’s new policy.
While some advisers might see Consumer Duty as a burden, you can view it as an opportunity to serve your clients more effectively.
So, it is important to cut through the media noise surrounding this upcoming change, and instead focus on making a Consumer Duty plan that meets both the FCA’s requirements and your clients’ needs.
2. The impact of the cost of living crisis on clients
By now, you will be no stranger to conversations with clients who are worried about the cost of living crisis.
Indeed, back in May 2022, the Office for National Statistics (ONS) reported that 77% of people in the UK were “very or somewhat worried” about rising costs.
With inflation reaching a 40-year high this year, the Bank of England (BoE) raising the base rate to 2.25%, and a series of market shocks since the appointment of prime minister Liz Truss, your clients could be experiencing continued financial anxiety.
One essential way you can come to clients’ aid in these circumstances is by offering a truly holistic approach.
Of course, your job is to add value – but in turbulent times, you could also act as a trusted confidant to clients who are under immense financial stress.
That way, clients can turn to you not only because they wish to grow their wealth, but for a personal relationship that offers much-needed peace of mind.
3. The effects of the cost of living crisis on your business
Not only are your clients’ financial situations changing, but your business will also be feeling the pinch of the cost of living crisis.
Unfortunately, rising overheads may cut profit margins in the next 12 months.
Plus, staff may require further financial support, including pay increases and a boost in benefits. A study from Canada Life claims 80% of employees expect employers to help them during the cost of living crisis. So, to retain the best talent, you may need to step in.
Plus, any borrowing may become more expensive, with interest rates being consistently raised in an effort to combat inflation.
In light of these challenges to your corporate wealth, it is important to regularly review your company’s spending and prioritise efficiency across the board, to ensure your firm remains financially viable in the coming months.
4. Recruitment during an adviser shortage
Finding talented staff can be challenging in today’s market. As experienced financial experts retire, FTAdviser reports there’s a shortage of younger talent, with only 1 in 20 retail investment advisers currently under the age of 30.
In response to this shortfall, it could be beneficial to invest in professional development for existing staff, including encouraging younger staff to complete exams and attain further qualifications.
Plus, it could be wise to incorporate pay raises, and perhaps taking on new staff at higher salaries than before, into your annual budget.
5. Finding new clients within the advice gap
A survey published by Money Marketing in January 2022, found that only one in six UK adults is taking advice.
Many prospective clients are falling into the “advice gap” to this day – and during the cost of living crisis, potential leads could be both extra-cautious about spending money on advice, and more in need of guidance than ever.
Reaching clients who fall into the advice gap can be achieved by staying on the front foot when it comes to your marketing.
Outsourcing your marketing to industry professionals could help you create a polished client journey that establishes and maintains trusting relationships.
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