Chet Velani, Managing Director at EV, joins me for a Q&A to discuss the focus of EV during 2023 and the challenges and opportunities facing the financial planning industry over the next 12 months.
What are the biggest opportunities for the industry in 2023?
Although the economic situation for the UK in 2023 looks uncertain, there is a fantastic opportunity for the financial services industry to support individuals to provide clarity for their financial planning.
We anticipate a continued push to automate the advice process, via the implementation of digital and hybrid solutions, based on the complexity of advice and characteristics of the firms' target market. The ongoing discussions with our clients demonstrate this appetite.
We believe the firms that will be most successful are those who can place a consumer at the heart of their proposition, supporting their consumers across the various areas of financial planning in the channel they wish to receive support across guidance, digital advice, hybrid advice and traditional advice. So we'll continue to develop and evolve our solutions to ensure they can implement market-leading solutions – putting the customer at the heart of their proposition.
And what are the biggest risks?
2022 showed us the uncertainties and factors that come into play for individuals making financial planning decisions. With the 2023 economic environment continuing to deliver uncertainty, the risk of recession and inflation pressures continue to persist. As a result, advice firms and their clients will need support and, given the backdrop, will likely see an increase in those needing financial guidance and advice. As with all periods of uncertainty, these times are a reminder of the value of advice and putting the client's needs first.
Consumer duty implications, and the recently announced thematic review of retirement income advice, will result in greater scrutiny of the advice process and outcomes for consumers. However, this provides a fantastic opportunity for firms to review and evolve their offering to meet the regulator's standards whilst providing a market-leading service.
What do you expect to have the greatest impact on the business this year?
As we've seen, to ensure long-term success, advice firms need to consider how to support a new generation of consumers who are likely to have far lower investable assets than the current cohort of advised clients. When making long-term or complex financial decisions, advice is the most effective way of helping consumers.
Technology has a significant role in improving efficiencies within the industry during 2023 and beyond. The obvious step will be integrating and harmonising IT systems to reduce the need for multiple manual interventions. But this in itself is not transformational in lowering costs. A cost change will be achieved if consumers can be encouraged to do more for themselves, reducing the burden on advisers and ultimately driving down costs and improving the firm's margin. Changing how consumers interact with financial products and services will be the real driver of a transformational improvement in profitably servicing more consumers.
Are you feeling positive/neutral/negative about the prospects for 2023?
Definitely positive. We've seen the financial service industry evolve over the last decade, and we are starting to make up ground compared to other consumer-focused industries. We now have more individuals than ever who need advice and support. Although adviser numbers are relatively stable, the adoption of technology and automation makes me optimistic that we are moving in the right direction.
Are there any market trends our audiences need to be aware of?
Over the last few years, we've witnessed the consolidation of adviser firms, resulting in a focus on driving efficiencies and reducing costs. At the same time, more firms are starting to focus on automation whilst placing the customer at the heart of their proposition. But, of course, there isn't a perfect solution, and ultimately it depends on the business' aims, service offering and characteristics of the target market.
What would you do to make life perfect if you had a magic wand?
Provide access to high-quality advice to each individual who needs it, as we know financial guidance/education needs to go further. Unfortunately, this is currently not possible, as many individuals need to hold sufficient wealth or assets to receive advice. Fully automated digital advice, which is delivered via algorithms and the automation of the suitability report, is our best bet for these individuals. On a positive note, we have seen fully automated digital advice in areas such as ISA / GIA advice.
This brings me to the end of my Q&A with Chet, and I would like to thank him for his time today.
A quick recap
The financial services industry in 2023 has a great opportunity to support individuals with their financial planning. The push to automate the advice process through digital and hybrid advice solutions is expected to continue, with firms focusing on placing the consumer at the centre of their proposition expected to be the most successful. However, the economic environment in 2023 may present risks, such as the possibility of a recession and inflation pressures. In addition, consumer duty implications and increased scrutiny from regulators pose a threat and offer an opportunity for firms to improve their offerings. Technology will significantly impact the industry this year, driving efficiencies and potentially reducing costs.
Overall the outlook is positive for 2023, with a continued focus on automation and placing the customer at the centre of the proposition. Additionally, the consolidation of adviser firms and a focus on driving efficiencies will continue to be a trend in the market.
As our readers, what's next for you?
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