If there is one sector of the community that can be the salvation of the IFA community in a post-RDR world, it has to be those approaching and at retirement. It is widely recognised that the wall of money controlled by the baby boomer generation which is starting to retire is unprecedented and unlikely to be repeated for at least two generations, if ever.
In practice, this means that there should be a steady supply of financial consumers needing and, perhaps more importantly, able to afford financial advice for much of the next two decades. Consequently, it is hard not to see the preand at retirement market as the primary audience
for independent advice.
In contrast, it is widely recognised that younger financial consumers will increasingly use online services as a way of accessing information and, increasingly, advice. There are many – I am one of them – who question if generation Y will ever use an IFA in the way their parents and grandparents have done. However, with all the wealth concentrated at the baby boomer end of the age spectrum, individual advisers aged 40-plus, as distinct from their firms, have little to fear from losing the attention of generations X and Y as they themselves move towards retirement.
I constantly find myself talking to advisers who tell me their clients don’t use technology. It never ceases to amaze me as, with the exception of the socially excluded, online access is virtually ubiquitous. Personally, I cannot help but conclude that the truth is more likely that the dvisers
making such claims are themselves reluctant to use technology and choose not to accept how pervasive it is becoming.
Recent evidence confirms that this even extends to older consumers. Just Retirement recently carried out its second annual survey of its annuity customers. This provides some fascinating insights into the extent of technology use by people in retirement.
Of the nearly 12,000 annuity customers surveyed, 74 per cent have direct access to a computer. Of these, no fewer than 82 per cent use the
internet to research, with 51 per cent using the internet to review financial statements. To be fair, support for being able to see details of their
pension online was limited, coming in at 35 per cent although 82 per cent use email. To me, this is clear evidence that however much some advisers may not like it, even the retired community is increasingly online. I believe this makes a compelling case for advisers radically rethinking the way in which they communicate with their customers in this market.
In recent months, I have seen some compelling consumer-facing technology addressing the annuity sector from a number of providers. Aviva’s current offering will be shortly followed by a number of others.
While many advisers believe they have a natural right to be the first port of call for anyone seeking financial advice, if in practice direct to consumer operations make their services more accessible and more affordable, it is hard not to believe that the IFA market share will decline. There appears to be an increasing debate about who is best placed to support consumers with modest means at a time when the average fund being converted into a new annuity is as low as £16,000.
Perhaps it is time for advisers to recognise that there are some sectors of society that simply cannot afford their services. As each day passes, it appears clearer that the key challenge to advisers in surviving in the RDR world will be delivering value at a price consumers can afford.
Perhaps the critical question should be at what level of assets or investment does independent advice become economic?
With the retirement community providing so many opportunities for advice, those firms which are able to embrace technology-based service solutions may be able to carve out a very profitable niche.
To support such services, we are going to need to see the provider community deliver far higher levels of automated processing. Currently, there are really only a handful of players rising to this challenge. In the annuity market, application tracking is a perfect example while Just Retirement has been offering an excellent annuity tracking service for some time now, with few of its peers equalling this proposition. Those organisations that wish to be serious players need to change this.
For advisers that really do not want to use technology, perhaps the way forward is the area of the market where consumers are least able to
embrace it. Longevity means everincreasing numbers of people are living in nursing homes or using domiciliary care.
’We are going to need to see providers deliver far higher levels of automated processing but there are really only a handful of players rising to the challenge’
With individuals whose assets total as little as £23,500, including the value of their home, where there is no surviving partner sharing residency, excluded from state support, there is clearly a growing number of people who would really benefit from quality financial advice. Dealing with this section of the public is a highly specialised matter requiring the need for advisers to be able to empathise with consumers facing very hard decisions towards the end of their lives.
This is an area where tremendous work has been done by the Society of Later Life Advisers (see www.society oflaterlifeadvisers.co.uk) which
specialises in helping advisers understand the specialist skills necessary to give advice to consumers in their twilight years.
In practice, this is an enormous and substantially untapped market. You are quite literally advising customers to the very end of their lives and
beyond, that is, dealing with the estate after death.