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I believe that we are failing society if we fail to engage with the next generation of clients. So I’d like to explore three areas. Firstly, the importance of advice to society. Secondly, why we aren’t currently reaching the next generation of players. And finally, how we can change that.
Royal London and the International longevity centre carried out a study where they took two groups of people gave one group financial advice, and the other group no financial advice, and they monitored all their assets every two years for a 10 year period. At the end of this 10 years, on average, the advise group were £47,700 better off than the non advice group, which obviously shows us a clear value off seeking financial advice.
But there were further split into an affluent group and a just getting by group. The affluent, advised clients, what on average, 24% better off than the affluent non advised counterparts, whereas the group who are just getting by were on average 35% better off than their non advised counterparts, showing that while financial advice is really important for everyone, it’s actually even more important for those people who are less well off and are less likely at the moment to be receiving financial advice.
A True Potential study into savings gap show that of the people surveyed, on average, they wanted £23,000 per year in retirement. However, their current pension planning and retirement planning meant they were only on track to receive just £6000 a year.
Financial planning is probably the most powerful way of closing that shortfall and making sure people have the retirement that they want. On the bright side 89% of those surveyed in the 18 to 24 year old age bracket who work, are currently saving for retirement. However 54% of them were using bank accounts to save for retirement and 10% are investing in cryptocurrencies. So it’s great news that they’re being proactive and thinking that thinking in advance about their retirement, however, they could really benefit from financial planning to make sure they’re doing the right thing in the right way.
Why we aren’t currently reaching the next generation of clients?
The FCA said in 2017, only 6% of 18 to 34 year olds received financial advice. So the huge demographic there of clients that we’re not reaching and a lot of potential out there that we can we can reach. There are two reasons for that disconnect. Firstly, there is a big age gap. The average age of a UK financial advisor is 53. And that’s not to say that an older advisor can’t connect with a younger client, but they are going to find it more difficult than the younger advisor who has grown up in a very different time with a very different worldview. They are likely to have different values, which will just make it more challenging to be able to form that close relationship that a planner client relationship needs to be. Next distrust generally of the financial services industry. We’ve had things like PPI and payday loans which will have eroded public trust over over decades and recently the British Steel pensions fiasco has damaged the faith people have in financial planners.
Another challenge is the lack of ability for people to delay pleasure. We want everything now. We have next day delivery with Amazon Prime and Netflix has every immediately on demand. We don’t want to wait for things anymore. But by its very nature, saving and investing isn’t instant and it doesn’t have a fixed end point where you’re suddenly reap the fruits of your labour.
Coupled with this, younger people often don’t know why they should bother seeking financial advice. They think it’s all about investing, and they can go online, find a robo advisor, super low cost, and and they’re all sorted. They don’t understand the value that we as planners can offer them. This is partly because we’re not very good at expressing that value. And also because financial education in schools is limited.
How can we change those things and be able to access the next generation of clients?
We need to attract a new younger generation or advisors into the profession. A 2019 PFS study showed that 30% of UK players want to retire in the next five years. So we’re already low in numbers and we’ve got a mass extinction event coming. We, really need to bolster it and we need to be attracting new talent into the profession. We have all heard someone say that they just fell into the profession but why is that? Why is no one targeting financial planning as an aspirational profession like a doctor or a lawyer? We need to increase the standing of our profession in society and build public trust so that those seeking careers, aspire to be financial planners.
At the NextGen Planners conference in 2018, we heard from Brett Davison who said in Australia, firms are adopting a subscription based fee model. People are used to subscriptions as society switches from ownership models to access models. The days of the CD rack are over as we now subscribe to access music content with over 30 million songs available on request. The younger generation is fully onboard with subscriptions from television and music to shaving products and gym memberships. So why can’t financial planning be one of those direct debits? We need to take a long term view and see investing time in younger clients now as an investment in a sustainable future for our financial planning businesses, creating vibrant business that serve society.