With an ageing advice profession and an increased government focus on engaging younger people in long-term savings, a number of commentators are suggesting there has never been a better time for budding young advisers to capitalise on current and incoming gaps in the market.
But with a substantial portion of younger people potentially unable or unwilling to consider paying for full advice and a shift in client demographics, optimising these opportunities will require some innovative thinking.
Seize the app-ortunity
Brett Davidson, director of business consultancy FP Advance, suggested gamification might be one way to look at plugging the generation gap.
He said: ‘There are lots of exercise apps where you can track your progress, and it could work like that. If I can see that if I save £5, it goes up to £6 the following week, and it’ll pay out £12 in a month’s time, it consistently shows the benefit. It’s about gamifying good habits.’
With increasing reliance on, and demand for, free apps and online services, how would one go about monetising this?
‘I could see online investment sources becoming free,’ Davidson added. ‘The mystique around online services is fading away, so if an online investing platform was cheap or free, it might get off the ground. I could see the likes of robo-advice doing that one day.
‘But no IFA is going to do that – why would they? It is going to need a tech company of the likes of Google or a new offering to fill that gap.’
Davidson (pictured above) said the ‘old guard’ could secure the future by educating children from a young age about good financial habits, not just through occasional talks in schools, but a collaborative and sustained effort from the advice profession.
This could take the form of an educational body, which focuses on personal finance education starting from a younger age, rather than something like the Money Advice Service, which is now being dismantled due to its ineffectiveness.
While there are a lot of advisers looking after those who have attained wealth, very few options are available to those looking to attain and grow.
‘This is where the likes of robo and other innovation comes in, and I know the Financial Conduct Authority is keen to stimulate this,’ said Andy Sutherland, managing director of advisory services at compliance consultancy TCC.
‘When you put that together with disengagement and large levels of personal debt, it becomes a challenge – there is a significant savings gap facing the country.’
Getting to work
A great opportunity to increase accessibility could be through employers who are already responsible for workplace pensions, suggested Sutherland, meaning advisers should be thinking about direct-to-employer services.
‘New advisers need to be thinking innovatively, but there is also a place for the employer, who right now is responsible for the significant chunk of saving through auto-enrolment,’ he said.
‘Some advisers are thinking about direct-to-employer offerings, which would extend beyond traditional corporate benefits. This gives employees access to decent value savings alongside auto-enrolment.’
Monthly fee the key
Recent entrants to the advice profession will mostly possess the professional knowledge and personal experience as a consumer navigating the ever-changing world of online services. From this talent pool, the next game-changing disruption could emerge.
Brett Davidson, director of business consultancy FP Advance suggests a trackable service that consistently demonstrates visible value in the form of growing finances. This could cost a manageable monthly fee and serve as a gateway to a more direct and personal advice service. A paid-for starter service is not that far-fetched.
I pay £7.49 a month for Netflix, as do many ‘millennials’. It provides a unique combination of access, choice and quality, and the money quietly seeps out of our accounts each month. If at the start of the tax year, we each had to pay £90 up front, I could almost guarantee there would be fewer subscribers. Any advice fee must be clear and not misleading. I know what I am paying for Netflix and I do not mind paying it.
Part of why younger generations are not saving into pensions (notwithstanding auto-enrolment) has been attributed to a lack of visibility, and a human tendency towards hyperbolic discounting. This involves valuing a smaller, more immediate and visible reward over a greater long-term reward. In a world of instant gratification, we could not just check our phones and see our money growing.
An app through which they could see funds growing in various savings vehicles, with a percentage or monthly fee that is also transparent, could engage young people.
It could offer an initial robo-advice capacity and the option to increase payments to access a more sophisticated advice service as savings grow. This would create the potential for a gradually developing and evolving engagement in lifelong saving.