With the move from FSA to FCA, the new regulator is viewing the industry through a customer lens that focuses on achieving the best outcomes for them. While the FCA is looking at different business models, the question it is asking each business is whether the customer is at the centre of everything the business does.
So how can advisers continue to thrive while ensuring they meet these requirements?
It’s about checking if their technology solution meets the outcomes of the RDR and ensuring they can demonstrate customers are at the heart of the business. The focus should be on their customer contact strategy, the frequency of customer touch points and establishing good customer outcomes.
One current area of concern is the advice gap for the mass market after the withdrawal of many bancassurers. While the mass market is getting advice on mortgages, buildings and contents, protection and pensions, is this sufficient? Or should they be getting more advice?
With the average salary now standing at £28,000, one key consideration is whether they have the ability to discuss investments when much of their finance is tied up in meeting the monthly bills. Given this, is the advice that Mr and Mrs Average are already receiving sufficient for their needs? As an industry, are we kidding ourselves that they want investment advice, when, in reality, they can’t afford it?
The mortgage market has taken off recently without anyone really noticing, providing an easy conversion to life assurance and buildings and contents. This enables advisers to provide advice and still make a living without relying on investment product fees that people don’t necessarily have the money for.
Therefore, advisers need to decide whether to provide holistic advice or just restrict themselves to certain areas, tailoring the advice provided to meet people’s needs based on affordability. In reality, it could be best to focus on mortgages and protection for the mass market, leaving the investment and retirement conversation for those who are more affluent.
With 96% of advisers having used a platform to place business in 2013, and 72% of new client money having been invested via a platform, another concern is the need for greater transparency of the costs involved. Therefore, advisers need to ensure they demonstrate all the charges to customers, including those related to fund management and the platform itself.
Although the market share of platforms is continuing to grow, the vast majority of advice is still being given face-to-face. However, with the emergence of generation Z, the customers of the future, the industry needs to become more technology-orientated to provide solutions that will meet their needs.
A further trend, potentially triggered by the inability to pay fees and the multiple layers of charges, is the growth of the D2C channel. The decreased level of interaction between advisers and customers is leading to an increase in execution-only services and an impending advice gap.
As a result, these changes provide commercial opportunities for savvy advisers who focus on the most appropriate markets and put the needs of their customers at the heart of the business.
About the author
Managing Director, Broker Select and Financial Advisers - “To me, matching the pace of technology change to the market as generations Y and Z start to become financially active will be an interesting challenge. Their relationship with technology will significantly transform how insurance and financial products are bought, and this new world needs to smoothly co-exist with the current one during the transition period.”More content by Steve Pearson