Looking back at 2022: A year of change and opportunity
Dec 15, 2022 1:43:09 PM
Chet Velani, Managing Director at EV, takes a retrospective look at the year that was and what we can expect to see in 2023.
Are we virtually back to normal?
2022 was an opportunity for us to see what the new normal would look like here in the UK following the COVID-19 pandemic. However, this year has been anything but normal. Instead, we’ve seen a forced push to use technology to connect with others. Working from home and connecting with clients virtually is the new norm.
For the first time in nearly 40 years, we’ve seen Inflation in double digits in the UK, fuelled by the soaring energy prices due to Russia’s conflict with Ukraine, supply limitations due to COVID and the aftereffects of demand-pull inflation due to Government stimulus, which has flooded the markets with money.
To help counter the rising rates of inflation, we’ve seen interest rates rise worldwide, with rates expected to increase well into 2023. So the days of near 0% interest rates, which helped drive economic growth post the 2008 financial crash, seem to be over, for now.
Initially, during COVID, tech stocks rallied. However, we’ve seen significant market volatility, the worst year since the 1980s. Even safe-haven assets saw unexpected volatility due to Trussonomics.
Uncertainty provides an opportunity
This year has shown us the uncertainties and factors that come into play for individuals making financial planning decisions. At EV, we’ve continued to drive innovation to support our client’s customers in making the optimal financial planning decisions.
We launched a brand-new set of adviser solutions covering risk suitability, investment and retirement planning to enable advisers to create realistic and robust accumulation and drawdown financial plans. Time-saving is a key focus – giving advisers more time to build strong relationships with their clients and explain plans.
Our EV Pro suite has been developed with adviser input and is powered by our market-leading asset model, which powers the stochastic forecasts providing a real-world outlook of the future economy. EV Pro has received extremely positive feedback and interest from the adviser community and is now award-winning.
A new way of approaching retirement income planning
To support advisers focusing on drawdown planning, we’ve launched our Income at Risk (IaR) measure, alongside our income risk questionnaire, income strategic asset allocations and income risk ratings, which provide an appropriate measure of risk for those drawing down from their pension pots. Market volatility can significantly impact those in the early stages of retirement, and the IaR measure is an appropriate measure for those entering or already within the decumulation stage. The traditional measure of risk, which is used for accumulation and considers capital value volatility, is inappropriate for those in drawdown.
According to Open Money’s ‘The Advice Gap report’ from 2021, there are 6 million individuals in the advice gap here in the UK. For these individuals who cannot afford to get advice, we’ve continued to evolve our guidance solutions to help educate individuals on their options for their risk suitability, investment and retirement planning. However, unfortunately, it’s widely recognised that guidance solutions don’t often go far enough for most individuals, with many preferring a personal recommendation instead.
With this in mind, we’ve continued to develop our digital and hybrid solutions, which, compared to traditional advice, use algorithms and the automation of suitability reports resulting in a potential 50% reduction in the cost of advising via a hybrid solution and up to 90% reduction in the cost of advising via a fully digital solution.
Outlook for 2023 - an enormous opportunity
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 implement digital and hybrid solutions to support individuals via advisers or the full automation of advice journeys based on the complexity of advice. The ongoing discussions with our clients demonstrate this appetite.
As the image below demonstrates, 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 covering 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.
We’re due to launch a white paper in 2023, which will demonstrate the enormous opportunity for our industry with digital and hybrid advice.
That leaves me to say, from everyone at EV, I wish you and your families all a very merry Christmas and a happy new year. Bring on 2023!