Financial planning in 2050

In a world of data DIY, planners will be life coaches, writes Jacqueline Lockie CFPTM Chartered FCSI, CISI head of financial planning


What can you do now to ensure your business responds and thrives?

• List all jobs not as roles but as tasks
• Review all those tasks and take a view of what can/will/should be automated
• Give training to maximise skills necessary to do the remaining tasks very well and efficiently
• Build relationships with other professionals and potential partners of the future
• Be nimble and use technology to drive efficiencies and drive down overall costs
• Gain skills such as life coaching
• Build a supportive clear culture and brand
With advances in technology continually removing the need for humans to perform as many tasks, can we get a feel for what the financial planning advice process and experience for consumers might look like in 30 years?

Tasks, not job roles

Breaking down job roles into a list of tasks makes it easier to see what could be under threat. For example, advances in AI will enable inputting of data by one well-qualified individual ­– that might be all that is needed. Some administrative and data inputting tasks are likely to disappear. One worrying consequence of this can already be seen in the legal profession. In the past, paralegals were hired in large numbers. They learnt the job and gained experience by starting with more simple tasks and learning to draft legal documents. Now those tasks are largely done by technology. As a result, the legal firms are not hiring as many paralegals, and the profession is bracing itself for a shortage of highly trained lawyers in the future. But even the role of these law firms is changing, with more consumer disputes being resolved by eBay than the US Department of Justice.

Platforms and investment styles

Advancements in technology along with other changes to the pensions provision in the form of auto enrolment have seen the development of simplified mass market products and platforms such as Nest, a workplace pension scheme set up by the UK government. With costs of advice and the amount of administration currently needed to give advice in the UK, we could perhaps see the Nest template being used with ISAs. This would be low cost and widely accessible.

An increasing interest in environmental, social and governance (ESG) fund strategies and pressures on costs and increased transparency could lead to a significant shift to offer more transparent investment products and strategies with active ESG strategies included.
We will see clients become more assertive about owning their fact-find data and searching wider in the advice market for quotes

We have seen the recent advancements with Open Banking – where a client might give their permission for all their data to be uploaded and accessible to others. This idea is already being applied with the Pensions dashboard project. But the General Data Protection Regulation and cyber security are potential issues with this. Individuals would have to give their permission, and I know some who would not do that for fear of that information being hacked (of course, now that the UK has left the EU we might need to rewrite GDPR). As a result of all this I think that we will see clients become more assertive about owning their fact-find data and searching wider in the advice market for quotes on fees and more detail on the service they could expect to receive for that fee. This Open Banking style advice service could lead to a new area of intermediation. If this advances, investment advice and product selection might become a vastly reduced part of the financial planning and advice process and therefore it is likely that more clients will pay more VAT on financial planning services.

Big movers in the market such as Amazon will have an impact. The use of their broad reach and technology could easily see them become dominant in the automated marketplace. I hope that they can help fill the advice gap where face-to-face advice is too expensive for many.

The future of the financial planning process and the financial plan

With technology likely to streamline data input, business costs should fall. This might mean that financial planners can offer their services more widely and deeper into the mass market where we currently have a significant advice gap. People with very little in the way of liquid assets are often in the most need of financial planning. But will we still be producing large comprehensive financial plans? We will need to ensure that the financial planning process for clients is interesting and engaging. We might see gamification being used to help engage clients and make the whole process more enjoyable.

Sitting on the Financial Planning Standards Board Chief Executives Committee and representing the UK as a CERTIFIED FINANCIAL PLANNER™ professional gives me the opportunity to learn about developments in many other countries. In Japan, hardly anyone has a desktop PC or laptop anymore. Most people only have a mobile phone. All data inputting and reading of outputs are done on a phone. It’s going to be extremely difficult for financial planners and paraplanners to create a comprehensive financial plan on a mobile phone. How will the clients digest this raft of information? I think things will need to become more modular to accommodate this. One concern I have with this is that it will be easier to miss consideration of the unintended consequences of giving a single piece of advice when it is given in isolation. How we will overcome that?

My concern with AI becoming a gatekeeper between those seeking advice and the financial planning firms is how those who are not tech savvy or otherwise vulnerable will engage. What protections will we need in place to ensure that we can help those who have money and need your help? Across the world I have seen that there are lots of vulnerable people, not just the elderly, but many others who have been shocked by life events, who need financial planning advice. AI could discourage those in real need from seeking help.

The impact on financial planning businesses

Small firms are likely to consolidate due to the escalating costs of private indemnity insurance, Financial Services Compensation Scheme levy, Financial Ombudsman Service claims and FCA costs. With economies of scale, firms are more likely to offer other in-house services, such as self-assessment tax return service, wills, and Lasting Powers of Attorney service.

When I ask firms what value they bring to clients, the consensus is that they help their clients sleep at night. They help challenge them and ask the difficult questions but also guide and support clients in making lifelong decisions that give them long-term comfort. They are already moving towards becoming life coaching style firms. I see this trend continuing. The culture of financial planning firms will be critical in ensuring clients who seek this kind of service will want to become and remain a client. Having a clear brand is likely to become ever more important so that prospective clients can find you.

The original version of this article first appeared in New Model Adviser magazine, 6 April 2020. Republished with permission.

Published: 14 Apr 2020
  • Wealth Management
  • Fintech
  • Operations
  • Financial Planning
  • FSCS
  • FPSB
  • CFP
  • GDPR
  • Pensions dashboard
  • Open Banking
  • AI
  • ESG
  • 2050

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