The world of financial planning is complex and changing. A number of financial experts have outlined several potentially disruptive forces in the financial planning sphere that are threatening the role of IFAs. These include changes in financial/fiduciary rules, robo advisors, and other new technologies.
The rise of the robo advisers
Robo advisers are essentially highly complex computer programs that use the answers given by customers in order to recommend, allocate and manage their investments. In the UK, the major emerging brands in the robo adviser sphere hit £1.6 billion worth of assets as of September 2017.
Face-to-screen technology
This is the technology used by services such as Skype, FaceTime, Cisco WebEx, or Join.Me. These services enable communication via telescreen, reducing the need for everyone to be in one geographical location. Whilst the advantages of being able to communicate via these methods (reduced commuting time, less need for “permanent” office space, and being able to deal with clients from further afield) are well-touted, the negative impacts are often downplayed.
The biggest threat from this technology is to the value proposition offered by the financial planner/IFA. The human interaction element has traditionally been a key part of the profession; building up a reputation for looking after clients and their money has always been important. Face-to-screen technology means that virtual client meetings can replace traditional meetings.
The removal of location as a barrier also means that the competition for clients increases enormously because advisers from all over the world can compete for clients from anywhere rather than just those in the local area.
There are numerous back office systems for IFAs to utilise. Firms such as Intelliflo provide a back office system for IFAs that can be tailored to meet specific requirements.
How IFAs must adapt
With this in mind, it is likely that traditional advisers will need to offer a different proposition, and specialisation could be the key. Because geography is no longer an issue, advisers will need to show that they are experts in a particular field and that they are the best in the world at dealing with that particular type of client. This will be needed in order to fill the gap left by those clients who leave to try some of the newly available alternatives.