Platforum analyst Andrew Ashwood looks at the growth in cashflow modelling and solving the retirement income puzzle ahead of his appareance at the flagship Money Marketing Interactive conference in April.
What is the most encouraging advice market trend you are seeing at the moment?
Retirement is a huge talking point for product providers, advisers and their clients alike. We are now four years on from pension freedoms and most advisers are still getting their houses in order. The days of certainty in retirement are fading away, with defined benefit pensions and annuities sailing off into the sunset.
The big challenge now for advisers is providing clients with a comfortable income throughout their retirement that satisfies their needs. Cashflow planning tools are getting better and their use is becoming more prevalent, particularly for clients at or in retirement.
A big positive is that from our research, we found that advisers anticipate their use in the advice process to only increase further.
What key reforms would help get people saving more?
Auto-enrolment has largely been successful into getting more employees saving into a pension. However, heeding the warnings from numerous studies, this will still not provide younger generations with adequate pension pots when they reach retirement age. Perhaps an auto-escalation policy like Save More Tomorrow (SMarT) might be able to plug the gap.
The rise of mobile banks and associated apps will also hopefully instil a more financially focused mindset into younger consumers. Tools utilising the power of open banking have their merit for people of all ages, enabling a detailed look at exactly where money is going and how best to budget expenditure.
In an ideal world, more people would embrace the results of their personal audits and decide to direct more funds into long-term savings vehicles instead.
What are the keys to winning over more consumers to start seeking advice?
It could be said that there is an insufficient supply of financial advisers in the UK, with many having healthy client books and in some cases not actively looking to take on new clients.
The vast majority of the population who don’t access financial advice simply don’t have the necessary funds or complex enough needs to do so. Services like the Single Financial Guidance Body need to be tailored to the mass market to provide consumers with the building blocks for getting their finances in order.
There will come a time when most individuals’ financial needs reach a stage of complexity where seeking financial advice is the best course of action, and it is up to the industry as a whole to foster the mentality that your local financial adviser can be that trusted financial partner.
What do you think marks out a truly innovative planning practice today?
The most innovative firms out there are utilising technology throughout the advice process. For some, this is an explicit goal in order to serve more clients, while others are more concerned about reducing human errors and business risk.
Advisers should be looking to provide more effective value-added services to clients, helping them to feel in control of their finances and better plan for the future.
The advisers making best use of some of the fantastic pieces of technology available to provide a holistic financial planning service are the ones whose fees will certainly stand up to any scrutiny and be best placed to facilitate future increases in demand for advice.