165 | The value of advice and how it's changing

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  • John Porteous, Group Head of Distribution, Charles Stanley
  • Lee Robertson, Co-Founder and Managing Director, Octo Members
  • Tsitsi Mutiti, Investment Manager, Charles Stanley

Learning Objectives:

  1. Understanding how client behaviours and advice is changing
  2. How these changes are affecting intergenerational wealth planning
  3. How advisers might need to adapt to demonstrate value



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It may contain errors and omissions.

In order to consider the viewing of this learning unit as structured learning, you must complete the reflective statement to demonstrate what you've learned and its relevance to you. By the end of this academia session, you should be able to understand and to describe how climbed behaviors and advice of changing how these changes air affecting intergenerational wealth banning and how advisors might need to adapt to demonstrate value. Hello and welcome to academia. In this learning unit, we are focusing on the value off financial advice and how that's changing over time to discuss that I'm joined by three guests. Let's meet them. They are John Porter. Yes, he is the group head of distribution at Chance standing. We are also joined by Lee Robertson, managing director and co founder off octo members on. But Sietsema Titi. She is investment manager also at Charles Stanley. John Port is if I can start with you. How would you say that the world of advice is changing at the moment? Well, we were definitely seeing a trend that was moving from advice towards financial planning before we moved into the lock down on dick ordered crisis. I think since we moved into a lot down. We're seeing lots of innovative ways of communicating clearly will know how technology has changed. I mean, we were speaking today using a zoom on. I think a lot of the life says they're using tools off that nature. We're definitely seeing Amore intimate conversation. I think that issues are really touching people in lock down intergenerational wealth, which has always been a really, really challenging and difficult and deepen personal conversation. These are the sort of things that we're starting to see planners talk about. So I'm really seeing the financial planning profession in the financial planning skills started to be deployed right across the industry. What city muted Europe, the the front end of this dealing with Lance every day. How much more difficult complex is your job getting than it was, say, 5 10 years ago? I think if we go back to the financial crisis, things really did start changing their We've had to really take into consideration not just what the client has presented to us in terms off the wealth that they would manage, but we need to be considering their overall wealth, all the aspects off their wealth and all the various stakeholders, if you like, attached to that wealth on Ben. Also, just considering all the regulator re requirements on our parts, making sure that the strategies we put in place for clients are suitable on and sit well within their risk mandates the object, but also the personal objectives for that person you know, to allow them to really start, you know, being able to have the lifestyle that they want but also fulfill some off those legacy, um, desires for the rest of the wider family s. Oh, you know, just tagging on to what John was talking about about the financial planning side of things. As an investment manager, my role is to put together a portfolio, but I work hand in hand with financial planners now to make sure we're providing a really holistic service to the clients. But how much more complex have the investment markets themselves got in the last decade, I suppose we've seen things like the emerging markets coming more online and Asia. There's this whole issue of how you generate meaningful income for clients as well. Yeah, definitely. The income part is really come to the fore, especially now Aziz were going through the covert 19 pandemic. We've seen a swathe off dividend cuts and cancellations. You know, we're in a very low interest rate environment, and clients are really concerned about how they're going to be able to generate the income that they need with its two cover retirement costs or just general living expenses. Um, you know, we've we've now got a lot off exposure to emerging markets that have become more developed, which provides us with the opportunity to diversify portfolios and offerings more to our clients. So I think the key for us as advisers is to be able to create the strategy that we can flex in times like this. But also there's the educational piece where we have to be working together with the clients more of a collaborative relationship with the client and being able to pre m some of these changes and conflict and complex scenarios that arise on. But hopefully we can sort of flex that strategy so it meets the client's needs going forward. Do you think Ni Roberson if I can bring you in at this point, John parties mentioned technology octo members is based around adapts and online. How much is technology providing an opportunity to advisors? And to what extent is it a threat? I think that's a really good question. I mean, I think what we've seen is all the last few years. There's been a quiet drift, more adoption of technology. But of course, what this Corbett's crisis has done is fast forward. All those plans and people about to get engaged really, really quickly. It was a big discussion about whether clients would engage digitally on video of those kind of things. While I think we belong that completely out of the water, because out of necessity they have. We've proven that the older generation is not France and technology the very using. In fact, many of them face time. Their there are Children, fiddle with cost them and all those kind of issues. So I think the benefits are there for everyone to see. I think we've put that particular message about particular conundrum to bed by this by this whole, you know, unfortunate incident in terms of a threat to technology, and I'm on the record of saying this for many, many years. I think it is well, think about Frank's of technology for advisors. I guess we're talking about online advice, robo advice, those kind of things. But I think what we've seen over the last few years, and I see no reason at all to see this changing is it is much easier for a full service advisor to add technology to their business than it is for a full service technology investment business. Like a robo advisor to add advice on their are not numbers of examples of fat. And I remember sitting on a panel with With the venture exactly probably the best known of our world would wise thing. He would never add advice to it because it wasn't necessary. I think the value advice means that technology is not a threat, particularly Theodore. Option of technology by advisors can only implement and supplement their visitors. Coming back on this point about being face to face sits here. How important is it for you to meet clients face to face? I mean, I can see that if you were doing something online £50.100 pounds, you know, fine, but actually people doing something involving the bulk of their wealth. £50,000.102 £100,000. Don't people want to have that personal contact before they make big decisions? Yes, I think they definitely dio as an adviser that face to face contact is invaluable. There's so much you can cover in half on our face to face, then over email or the telephone on. And I think you know one thing that advisors value a lot and clients value as well is having a very strong relationship of trust and having confidence in, you know, the adviser. So being able to sit in front of a client and talk to them about you know what we can provide them but also get that information in terms off the entire family. For example, you know you can get things like names of Children and how you know the relationships between the parents and the Children and form a really good picture off how this wealth is probably going to pass down the line and who to bring in at specific points on Did you know that face to face makes that relationship even more solid? Um, you know, these mentioned about adding technology into the mix and you know, when you're in situations like this. Throwing in your video conferencing into the communications with clients is easier when you've got that strong relationship, which was built first through that face to face connection. Lee. I see you wanted to come in there. Yeah, I think it's worth making the point on. I think since he made it very, very well in the face to face will never go. In my opinion, it isn't be. I think that the supposition that kinds turned up just with a check to invest is not the starting point in ALS. The years I was advisor, clients turned up with a folder or a box full of stuff that we've accumulated over the years pension plans and employee benefits statements and allow the other things bank statements and all that stuff needs to work through. And it's hard to do that digitally. I'm not saying it's impossible, but I think the relationship forms at that early stage, which is before you even get to the planning stages. The discovery stage discovery is much harder to do, I think, digitally than it is face to face just because of the sheer complexity of the affairs of some of the people who come along. John Portis. Yeah, I think what what we may start to see is an environment where people want to build relationships. Feast of Feasts. I think there's something about how people are their manners. There we about them, how the put people at ease, holy work through the shoebox. That that leaves referring toe is an adviser for 25 years. And then it was almost always a shoebox, flew off papers and that that is quite difficult to do. I mean, I tend to find that the whole mark off, a greet adviser agreed. Financial Planner is hardly handle that first meeting. I think that we've really moved on from the fact feeling being a 20 page questionnaire, which is sort of like me shooting questions of year Teoh question based sort of interviews on day period of engagement, which which puts people. He's What I think we will see with technology, though, is ongoing reviews periodic catch shops being really technology based. I mean, for example, if you and I have been working together for five years and you wanted to get a space in my diary, historically, that might have taken I don't know. A week, two weeks, three weeks before you and I could find that slot. Same place, sitting time. Get together. No. Through the one who is a technology that that could be He catched up in 45 minutes, and I think that that is where technology is really going. Teoh Revolutionize. I think the productivity on existing relationships rather than the take on off new relationships. One longer term theme I want to pick up on is, it seems a while ago now. But we had RTR liberals. What impact does that have, particularly on the educational side of things when it comes to advice? Do you think advisers in the round are better qualified, Better able to deal with clients than they were 10 20 years ago? Uh, that's a really interesting question, I think unquestionably there. Better qualified, I think. Absolutely. If if I I'm very last game, I indirect still with lots of young advisors. My mentor, a couple. They are incredibly competent. They're incredibly technically able in a way that perhaps in John and Ice time, we perhaps well, as much so because it's a very lucrative business. So I think they are. There are some super young advisors coming through something any starts of apparent planning moved through The advice for some fantastic para planners stayed aspirant planners on it is actually quite humbling to see how well qualified, how technically competent they are across the East. Uh, are the better advisers? Have we sacrificed some of this softer skills? Perhaps. But then, at the moment, what we see is the collaboration in our profession has never been better. The collaboration off groups, you know, I think of financial planning, training academy and I think of the mental groups, and I think of all of these fantastic groups where advisors come together to learn from each other toe, understand what's working for them. What isn't is something that I wish we had when I started out where it was very much one person, one client, one person, one sale. And I think we just come a 1,000,000 miles from there on. I think RDR was a great general catalyst for that the world firms before RTR who were doing incredibly well, But I think the collaborative nature and the technical competence now advisers, as the Adlai soft skills mean they really become enough a force for good in the social fabric of our nation. And I couldn't That's probably John POTUS. Yeah. I mean, I think rdr well, I'm not sure I buy into the idea that RDR was the catalyst. I think it was an accelerant of change. You know, we're heading change. But if you look at the RDR time line, it wasn't RDR That kind of gave the green light to go. It starts it an environment where we started to see the platforms. The first CRM systems come in at the beginning, off the word proposition. For example, nobody was really talking about Proposition No one was looking at investment strategies. Everything was very disparate on what it really did is it started the journey off the proposition being owned by the advisor rather than owned by the product provider and given to the adviser as a sort of a turnkey solution. Andi, it really was the beginning off lodging the value with the financial planning and advice process on the ability for advice firms to define what financial planning means to our firm on the kind of service on relationship you will have should you become a client of our firm on, I think over there, the eight years or so since we saw since ideas come into being, I've only seen an acceleration of that process on Technologist played a big part in that I want to pick up on another couple of longer term themes that are having an impact on advice and relations with clients. One is where the tax system in the UK is at the moment, since he what's what's your take on it is taxed more complex now is part of the overall advice process for clients than it was 10 15 years ago, or same level of complexity just a bit different. Yeah, I think I agree with the letter. It tax will always be complicated. Um, and I think advisers recognize that clients recognize that so as an adviser, you know, our role is to make the process a smooth for the clients, and by that, what we can do is provide the information that they require to complete the tax returns. We've seen the introduction off the the standard reporting system, the common reporting system, where we have where HMRC has to give information to different tax authorities around the world on our role in that is to put that information together, saying that all to hmrc um, and all the while, whilst way investing in terms of just looking at their overall wealth and building that strategy, finding tax efficient ways for the client, obviously, the larger the amount of the bigger the wealth, the more complex it is and that then brings in more complex tax issues. Eso is always there in the back of our mind, no doing the right thing by the client and also during the right thing. You know, within the tax system. No on jump. What is a lot of, I suppose, where ones in dressed in the tax system sits depends a lot on one's age, whether you're more worried about income tax, capital gains, tax, inheritance tax, how you sing the demographics off, I guess the client bank changing over time because we hear a lot about you know what, particular 70 with baby boomers. How is how is that peace changing? I look, I think that's a fantastic question. Because, of course, as we sit here having this conversation today, you know there is that the big raging is to who's going to pay for these enormous government subsidies that we're seeing? Um, will this ultimately land in the form of direct taxes? What? However you choose to define direct taxes, you know, a great wealth tax or whatever, But you know, if if we look at the framework that we have today, it is interesting because I think direct taxation has arguably simplified from any. But the penalties of stepping outside the boundaries are far greater than the everywhere before. Um, I think there's a huge emphasis on using the basics. You know, one of the things that everybody can do in every walk of life is to use the basic allowances. I mean, clearly, you know, pensions are is a little bit of a movie point. If you're particularly wealthy, your ability to accumulate your pension fund this greatly limited. No, but you know things like habitually using the eyes a low incidence habitually using CGT using on the moment that we're in right now for a CGT planning for transfer of assets when assets are little toe work with trusts, things of that nature. These are all areas where advisors can add incredible value particularly at times where asset values are lower because it is just easier to move things around in terms of your wealth pots, but certainly in terms of looking at of the tax framework, the thing that always makes me quite amused is that if you take pensions, for example, for a number of years now, we've been on this great journey off pension simplification. Yet the fact is so it's not the current, um, tax receiving that is particularly complex. It's the inability to remove any off the onion layers that fall behind it. The legacy a taxation that you must move through. That means actually, your tax historically is incredibly complicated. And that's where a lot of mistakes can be made, particularly around pensions, historic protections and things of that nature. Well, it does raise the question. If you outlined, I think earlier with the advice community. It's a profession. It's it's getting more highly trained, you know, the recruitment into it is good. Is there a danger that if it attracts lots of very clever people, the first thing they're gonna want to do is tinker? There's a real problem with clever people is they desperately want to over engineer things because it's intellectually challenging for them that it's an interesting point and I think there's some truth in that. But I think the professional financial planning, it does work on tram lines. You know that if you think of the six that process with CFB or, you know, the there are lots of ways that it's tram line. I think it's harder and harder to team toe like that particular firms have on this. This is where they really have come on. And John talked earlier about the proposition. If they have a value proposition on behalf standards internally, I think there's lest in Crete, to be fair, I think where you see bits of advice that perhaps you never used to see so much of it is, particularly as a nation, we have got generally wealth there. I'm not saying at the individual level I'm not saying that particular wealthy morning with all this going on, but younger people inheriting larger sums of money so they're accessing wealth earlier, So I think that leads to challenges for some firms. But but no, I'm not sure I buy. I think good friends with good pro good value propositions. Good financial planning process is good and vestment processes. And I take six his point really well. But they have to work together. I think it's less about team brings about being a while and sticking to the violent proposition we talked about, some of the longer and the shorter term trends in the advice market. But what impact is this having on intergenerational wealth? Planning how you sing that particular piece change? Um, Well, what you find is your you know, you're having to deal with client number one who is the head off multiple generations simply because we're living. You will have three or four generations who have a vested interest in the structure that we're putting together all the wealth that we're managing. Um, it's been really important for us to provide a service where we can consider all the people who have got an interest in the wealth that we're looking after and the strategies were putting in. It's for the client. So it's, you know, what we found is when you're at that discovery stage. A Zai mentioned earlier, getting to understand the individual who they are, who you know the Children are What are the Children's interests on? What is that individuals wishes for the wider family. Onda. Also, you know this this product that we're putting together for them? Um, for us. We've tried to encourage clients every night, every meeting to bring in one off those family members who may end up being an executor of the estate, potentially maybe a new attorney at some point, so we can also get input from them. It's really about collaborating with the individual client, but also the wider family or stakeholders just so we can plan a hit for the future, because advisers, we always have to be several years ahead of our clients requirements and the requirements off. Those were great in here. It later down the line. Eso bringing in other advisers like financial planets. In my case, because I'm an investment manager on may be an accounted in. This a lister are is very important. In addition to bringing in other members off the family into the conversation as early as possible, John Port is picking up on that point. Do you think now advisers need to think much more in terms of being an adviser to the family rather than to an individual. Yeah, yeah, I think that the situation that we find ourselves in will transform intergenerational wealth transfer. We've all known that, you know, it's one of these big demographic time bombs, and we also all know that it's, you know, something that's said to be really difficult to discuss. But, you know, we're seeing examples all across our business off these bridges being crossed because it's a responsible thing to do, you know, families, air coming together. Um, the nature off wealth is not just money. People are looking at health, mental, well being happiness, the full portfolio off things that go into how you would define your personal wealth to be on. I think that this is giving rise to some really interesting conversations on that. That's what this is really about. You know, it is this. You know where the professions be. The investment managers or financial planners are having really great conversations with their clients on taking them on the journey, helping them understand the questions, to ask the environments and asked how to ho to address things that perhaps maybe highly emotive or potentially threatening. We've done a lot of work over the last year around intergenerational wealth transfer size. I've seen a lot of people who are really skilled in this area on one of the things I I see is a common denominator among stores that have excellent businesses or practices in the Syria is their ability. Teoh really unlock tremendous insight by engaging people in storytelling, great questions but setting an environment where people feel comfortable to talk about their fears in a society and an environment that we're in right now, which has got so much uncertainty around it? Yeah, a couple of aspects of that Leawere John has described aware that obviously is quite complex. There's a lot of moving parts when you're doing intergenerational planning. But to what extent does computational computing power that we have now does make that an easier task than it waas 10 20 years ago? Good question. I'm not sure it makes it much easier. I think you know, good financial planners are using financial plans, and however they arrived with those whether the using technology to back up what they're still doing it in a rather analog way. I guess you can get to some of the the numbers quicker, but I think you can't short circuit. You can't short cuts the financial planning process, So I'm not sure that the computational power particular helps itself helps in some of the presentation. I think you know that the graphic output of some of some of the technologies is very, very good, but it doesn't short cut the fact that it's people talking to people. So I think that's that's just background check is supposed to fool around Cincy Final question was A bit of a lot of this seems to come down to trust. If you're dealing with family on, I guess the time people need the advice, probably when something very big and basically, if somebody's older, it is. Perhaps, you know, it can often be quite bad news. What's what's happening with them? I mean, how do you how far out do you need to build that trust so that they do trust you when crunch time comes? A ZA early as possible is my simple answer. The earlier you can build that relationship of trust the better, Um, when a client's gets into a stressful situation, be it's divorce. The death off a loved one and they cut. You know, there's a lot of things that are on their mind, and they just need someone who they really trust and have confidence in and who understands them so that, you know, they can start putting the wheels in motion for whatever needs to be done. Um, there's a lot of, you know, we've talked about the face to face, and I think John mentioned this or did you to this point that, you know, in that face to face meeting is a lot of things that are not said, You know, just through the body language, the tone of voice, and in those stressful scenarios, there are a lot of things that aren't said in words. But if you have the really strong relationship with the client and really understand them well, you can preempt a lot of things that need to be done. So you know this earlier you can build a strong relationship. Would the client and also the wider family because normally, if you think about you know, the situation that some families are finding themselves now do took over in 19. It's not necessarily the client that you're going to have to be dealing with in that period of stress, it will be another family member, and having a good relationship with someone else in the family is extremely important. We're bringing some of these threads together cause we've got about five minutes of the program left. I would get everybody sense of how advisers need to adapt to demonstrate value in this changing world. Lee Robertson Cook Can I come to you on this? First I I think advisors are proving right now that they're adapting. You know that they've adopted technology that, being in touch with clients. I see lots of discussion on social media and other platforms where they're demonstrating each and every day they're reaching out to their clients or it's a freeze. I'm not back, you know. But they are getting in touch with clients there talking to them. They're discussing with them less about the money. More about the pastoral care around the money. I think clients, whilst they have concerns about the money, the moment they are much more concerned about the family welfare, they're passable health, their overall situation, and I think advisers quite uniquely, I said, I think amongst the professional adviser set of solicitors, accountants, professional financial planners. I think they are quite unique in the fact that they have very, very close of regular relationship was clients. So I would say they're demonstrating each and every day right now. If Social Media is to be believed on the evidence that I see that they are demonstrating and they're doing the right thing, no jump, what is again, how does this get measured? Because someone might listen and say what? Lee said. Yeah, that's that's quite quality if it's quite subjective. But people like the regulators they love. They love numbers and bar charts. How do you How do you try and pull those two worlds together if you're an adviser? Yeah, I I think good vice Good advisors are really excellent at setting out what value looks like on educating their clients along the way. I think that the mentioned the point around the financial planning process to 60 each process the importance of a financial plan. Um, I think value really is around ho. Things are performing relative to that plan, the extent to which you remain on course, the extent to which you use all your tax elevenses the extent to which you make crude and on pragmatic investment decisions rather than panic ridden and emotive investment decisions on Do you know, essentially stick to that yellow brick road. But because you trust the plan and the underpinning planning assumptions. So I think you know to your point there is an element of quantitative, of course, performance. Please apart. It would be naive to expect it not to play a part, but it isn't all the be all and end all of it. We've talked to vote the behaviors and the coaching element of it that that's huge on. Of course there is, if you like the pragmatism off, making sure that you're using all the available allowances and you're doing all the right things along the way to make sure that the financial plan achieves its end goal. So I do think that this quant under is call, and there's ongoing within that, and it's zoop ID talking with clients. What what's their hierarchy? What is it in your experience, they look at toe work out whether you and financial advisors are producing value for them. No, I think there's this three main categories, you know, performance value and fees on, and people tend to think fees comes first. But actually, it's the value part that really and the service that holds the most weight when it comes to clients. And again, it goes back to everything that we've been talking about, you know, the communication being therefore, the client, when they really need need you being able to articulate, um, the strategy that you're putting in place, being able to show the tie ins that we are using all the allowances available to them, you know, within the tax system, Um, and you know other things that it's really that are difficult to put a number on light, that relationship of trust, Um, the has alluded to the fact that, you know, the advisers are so skilled now, and we're having to deal with a lot of information coming in, you know, through technology which has been great. But how do you then distill that for the client so that they really understand how this information has been used for? Are there benefits whilst allowing them to live that and have the lifestyle that they want for themselves now and also preparing for the next generation so in that respect. You know, the fees sort of becomes a sort of, you know, the at the end, off the off, the whole thing when you're looking at the whole proposition and what and what is important. You know, John's already said performance is a great way off measuring. If this service is really work, it's, um yeah, And then I think you know the fee will be number three on the list. We are almost out of time. So I wanted to get a final thought from each of you out of everything we've discussed. What be your key message to leave today? John Port is, I think, no more than ever, I would say better questions equal, better answers, which in turn, being better financial planning outcomes for clients in these circumstances. Thank you that seem otc. Um, I think my final word would be to all advisers. You know, it's really important for us to form strong, lasting alliances For the four or client's sake. We can only provide a really good service that our clients will value for a very long time. B. Robertson a final thought. I think face to face with clients beats everything but exploring the way technology and help going forward, particularly with communication, is gonna be what they're pursuing. Thank you for joining us and do stay with us. We've got some information coming out in a second on how you can use this as part of your structured learning from all of us. Here, Thank you for watching goodbye. For now. In order to consider the viewing of this learning unit as structured learning, you must complete the reflective statement to demonstrate what you've learned and its relevance to you. By the end of this academia session, you should be able to understand and to describe how client behaviors and advice of changing how these changes are affecting intergenerational wealth banning and how advisors might need to adapt to demonstrate value. Please complete the reflective statement to validate your CPD.