The Covid-19 pandemic has had a largely positive impact on adviser businesses according to new research.
AKG’s Future of Advice research paper, found that the coronavirus pandemic has acted as “an accelerant” for the evolution of some aspects of the advice and distribution model in recent months.
It said changes that looked likely to occur in the market over the next five or more years have been compressed into a three month period. This includes greater adoption of automated and technological processes, and the switch to home working and far fewer face-to-face meetings with clients.
The report says that most of the consequences for the industry have been seen in a positive light by intermediaries.
• Home working has been facilitated as far as possible and become routine, leading to increased productivity for many firms.
• This effective home working has been based on good, strong and fully-integrated technology allowing individuals and firms to function effectively.
• Client video conferencing and calls are replacing expensive face-to-face contact, again as routine, and some firms commented that this is leading to better and more frequent client communications.
• As a result of these revised operational models, time and travel costs have been dramatically reduced.
• Servicing existing clients has therefore been easier for many and become more efficient.
• Senior executives interviewed for this research commented that the management of staff has been easier in the new circumstances and remote operating environment.
However, the research also highlighted some negatives for adviser businesses. First and foremost has been the problem of generating new flows of business, with one network service provider interviewed for the report stating new business has “fallen off a cliff” for some advisers.
The AKG report states that there are systemic reason for this, with the example of an initial requirement for a wet signature being cited by many research participants. In addition adviser firms state that face-to-face meeting can be more constructive when it comes to new business clients.
The report says: “This interaction is seen by many as critical in the early stages of any advisory relationship.It is not just a matter of fact finding and needs analysis but related much more to chemistry and deciding whether the client/adviser fit is good.”
When asked what they believe the long-term implications for clients will be of the current Covid crisis, many advisers saw a positive outlook for engagement, with 52 per cent stating it will increase demand for financial advisers from existing customer and 48 per cent saying it will increase demand from new customers.
However just over a third (35 per cent) stated it may deter some clients from investing.
The research also found that one in two (53 per cent) stated that the Covid crisis may force some firms out of business, while 45 per cent said it would result in an increase in the number of advisers retiring.
However 34 per cent state that it could also see an increase in M&A activity with more adviser businesses being sold.
The report added that this added to the need to replenish the ranks of advisers. The report states: “The age profile of financial advisers is inescapable. Whilst not necessarily an immediate problem it is obvious that the industry must continue to work towards the development of plans and initiatives which target the introduction of new blood into the advice ranks.”
It added that the report found that servicing baby boomers through retirement and later life was the main focus of adviser businesses. However it added once the baby boomer wave has subsided more worries will emerge around how best to generate new client acquisition opportunities.
“While more creative new business generation strategies need to be developed in the long-term, over the short to mid-term advisers need to work harder at tapping into intergenerational and multi-generational advice opportunities by further extending existing client relationships.”
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