Expert: Emma Napier, Consulting Director, NextWealth Facilitator: Rod Bryson, Tata Consultancy Services (TCS)
Headlines:
- Financial advice firms are focusing on growth, with a notable increase in hiring, especially in compliance roles, to meet regulatory demands.
- Average ongoing advice fees have risen to 77 basis points, with an emerging trend towards subscription and capped fee models.
- Firms are reassessing client segmentation, off-boarding less profitable clients, and adapting to regulatory pressures like consumer duty.
- Technology and AI are viewed as essential tools for improving efficiency and engaging younger generations of clients.
- The industry is grappling with how to communicate the value of financial advice, particularly to sceptical younger clients.
Discussion points:
Growth and Recruitment Trends:
Many advice firms are focusing on growth, with 40% of growth-oriented firms planning to hire, particularly in compliance roles. This underscores the industry's dual priorities of scaling operations and adhering to regulatory standards.
Evolving Fee Structures:
Ongoing advice fees have increased, reflecting shifts toward subscription-based and capped fee models. This trend highlights a response to client demands for greater transparency and flexibility in fee structures, with firms balancing profitability and value delivery.
Client Segmentation and Regulatory Impact:
Consumer duty regulations are prompting firms to reassess their client bases, often leading to the off-boarding of less profitable clients. This reflects the challenges of cost-effectively serving lower-value clients while meeting stricter compliance requirements.
Generational Engagement:
Engaging millennials and Gen Z presents unique challenges due to their scepticism of traditional advice models. Intergenerational wealth transfer further emphasizes the need for tailored strategies to connect with younger clients and their specific financial priorities.
Technology and AI as Enablers:
Digital tools and AI hold significant promise for enhancing efficiency and personalisation, particularly in reaching younger clients. However, successful implementation requires preserving the human connection central to effective financial advice.
Adapting to Future Trends:
The evolving landscape necessitates targeted support services, innovative value propositions, and effective communication strategies to address shifting client demographics and expectations.
Key takeaways:
- Adopt Flexible Fee Structures: The move towards subscription-based and capped fee models can provide greater transparency and align with changing client expectations
- Refine Client Segmentation: Firms should strategically focus on high-value clients while exploring scalable solutions to serve lower-value segments within regulatory frameworks
- Engage Younger Generations: Tailored strategies are essential for connecting with millennials and Gen Z, who often require more accessible, digitally enabled advice models
- Leverage Technology and AI: Technology can enhance personalisation and expand reach, but it must complement the human element of advice to maintain trust and engagement
- Prepare for Intergenerational Wealth Transfer: Developing models that address the unique needs of younger clients during wealth transitions is critical for long-term client retention
- Communicate the Value of Advice: Firms must focus on clearly articulating the tangible benefits of financial advice, especially to a younger, more sceptical audience
