Last month’s Budget announcements have made financial advice more crucial than ever.
Adjustments to capital gains tax (CGT) rates will impact investors and those with assets, emphasising the need for early tax planning to minimise liabilities.
For property owners, changes to inheritance tax (IHT), including extending the IHT threshold freeze until 2028, affects families seeking to manage generational wealth.
When managing personal finances, terms like “financial planning” and “financial advice” are often used interchangeably. However, they serve distinct purposes and cater to different financial needs.
Unlike financial planning, financial advice tends to be more immediate and tactical
Most firms choose to position themselves as financial planners, prompted by Financial Conduct Authority initiatives such as treating customers fairly, the Retail Distribution Review and the Consumer Duty.
This comprehensive, holistic approach to managing an individual’s finances includes setting monetary goals and creating a strategy to achieve them, addressing different areas of a person’s financial life.
It looks at the long term, often with continuous monitoring and adjustments to stay on track with life goals, all of which deepen ongoing relationships with clients.
Financial advice, on the other hand, is typically narrower in scope. It is often situation-specific and addresses particular financial issues or decisions. Unlike financial planning, financial advice doesn’t necessarily cover all aspects of an individual’s financial journey; it tends to be more immediate and tactical.
As the tinkering with pensions, CGT, IHT et al only accelerates, firms would be wise to establish a subscription service
This Budget has shown why the shift to financial planning isn’t always in the consumer’s best interests.
In the run-up to the event, there was a considerable amount of speculation around changes to pensions, whether that be tax relief or restrictions to the pensions commencement lump sum, as well as IHT relief and thresholds, and CGT.
All these factors sit firmly within the financial adviser’s purview.
How do those without a relationship with one reach an informed decision about a plan of action ahead of possible changes?
According to FCA data, the average number of ongoing clients for a UK financial adviser is 115. Surely, if advisers are busy dealing with existing clients, this leaves precious little resource available for firms to deal with any incoming enquiries. This leaves people out in the cold, which reflects poorly on us as professionals.
The added benefit is that these firms will be the first clients turn to when they move to more sophisticated financial planning needs
I suspect many people who acted ahead of the Budget did so based on what they read in the broadsheets. Many made poor choices.
The pace of change in our profession is accelerating, driven by consolidation, and the latest FCA Retail Mediation Activities Return confirms the decline in numbers of smaller advice firms.
But consolidation should be about more than just garnering increasing assets under administration and adviser numbers. It should also be about launching new services precisely designed to attract new clients through the door.
As the tinkering with pensions, CGT, IHT et al only accelerates, firms would be wise to establish a subscription service.
A subscription service allows clients who don’t need the complete financial planning experience to access a qualified financial advice professional to deal with a particular issue that concerns them at a time that suits them.
Firms can incubate relationships with individuals much earlier in the financial planning life cycle. The added benefit is that these firms will be the first clients turn to when they move to more sophisticated financial planning needs.
Tim Sargisson is former chief executive of James Hay and Sandringham Financial Partners, among others
Mr. Sargisson, isn’t this just semantics? Unfortunately, the industry is now beset by meaningless titles. I see where you are coming from as some planners use their title to ramp up fees, but this rather panders to those precious people who consider themselves a cut above eschew the advice title as if advisers didn’t plan. The only really meaningful title is still IFA. It spells it out plainly: Independent, dealing in financial matters and providing advice (which inevitably includes planning). But we now have advisers, planners and wealth managers, most of whom are actually doing the same job.
Those that can….do.
Those that can’t….preach.
“Most firms choose to position themselves as financial planners, prompted by Financial Conduct Authority initiatives such as treating customers fairly, the Retail Distribution Review and the Consumer Duty”.
A sweeping generalisation. Proper financial planning and coaching (including proper lifetime cashflow forecasts) has always been one of the most valuable, meaningful and useful ways to help clients – and comply. Puts the client first.
Yet maybe 10% to 20% advice firms currently operate this way. Planning first – financial products last.
For those firms doing planning right, the outcomes achieved for clients are often quite spectacular. Positively life changing.
To flog a quick product solution (in the name of expediency) and ignore the client’s bigger picture (what is the money for? How much is enough?) is ultimately shortchanging the client. No wonder we have has so many mis-selling scandals. All product lead.
“Consumers” – what a word – suggests we are still an industry? Perhaps no new products need consuming!
The right clients will pay good fees to gain control, clarity, confidence – and peace of mind.
For financial advice being “immediate and tactical” read fast, shallow and an old style way of operating. Perhaps this modus operandi allows advisers to hit this week’s sales target. Next! What could go wrong?
Yes, there are fiscal calendar deadlines – but that is why proper planners will start with “before we start, is there anything important or urgent we need to address?” or mention there is a deadline looming.
Expediency should not be an excuse to shortcut doing a proper financial planning job for the client now – and ongoing.
I’d hoped this sell-it-quick then forget it style of operating was long dead? Apparently not.
There are only so many hours in the day.
To state advice capacity issues currently “leave …. people out in the cold, which reflects poorly on us as professionals”.
Really? Who cares what the mass market – including financial journalists – think? Financial advisors have no duty – moral or otherwise, to try and help everybody with a pulse. That is the route to being crazy busy – madness – then running out of money. No thank you. It is easy to lose money. Any fool can do that.
Did the financial advice community ask for uncontrolled, uncapped regulatory and PI costs? No. There can be no going back to the days of dealing with anyone and everyone. Leave that to headless chickens. Focus.
If you are at capacity – close your firm to new clients or expand. But trying to help everyone? Don’t even try.
More than ever, advice firms need to focus on their niche. Serve those existing clients you know best fantastically well – and at a good profit. You will be appreciated. You will be irreplaceable. You might even be loved.
Most switched-on proper financial planning firms will already be engaging with the children, grandchildren and other shareholders related to their existing clients. Wise to do so.
It is not the fault of UK advisers and advice forms that there is a perceived ‘advice gap’. The advice gap is not of the advice communities’ making – nor our problem to solve.
There is and will be ‘guidance’ (not necessarily advice), D2C and robo services that can try fill that void. No doubt AI too will play its part. Eventually.
I’d advise UK advice firms against a low fee subscription service for all – as cannot see how this can be operated at a decent profit – without consuming you, your capital too – and driving you nuts.
If it is such a magical market and opportunity, I recommend Tim Sargisson jumps in and throws his life savings into it. Let me know how it goes! This is not advice.
Successful advice/planning firms do not need a pile of extra cost, hassle and administration – distracting from their core skills and audience. A money pit. Leave it to the innovators and disrupters with bottomless pockets.
As Ricky Gervais says: “If you try to please everyone you’ll please no one”.
Tune out the white noise. Stick to delivering all-consuming wonderful client experiences to your core clients.
No need to accept poisoned chalices. Concentrate on delivering real client care. All will be well.
Wow! That is some post. But cashflow planning. Yes, it has some uses, but is by no means a panacea unless it is regularly revisited and updated. There are so many variables, ill health, change of job, marriage, divorce, moving house, children and so on. Each event will need to make cashflow revisions. And how will the client love that with fees returning each time? Yes, I guess that this was precisely Mr. Sargisson’s point. A quicker and easier way is to first ask the client for one year’s banks statements and credit card statements. In the former if the amount at December is bigger than the amount in January then it is fair to conclude the client is at least solvent. With the latter it will show what other things the client spends their money on. The two together will be the basis of decent advice.
Well said Iain