Dynamic Planner’s CEO Ben Goss sets out below what he believes the next 12 months has in store for the advice industry.

Advisers won’t need a crystal ball to know that 2019 is likely to start in a more challenging place for them and for their clients than 2018 did, but the advice industry earns its corn in times of uncertainty. 2019 will offer huge opportunities for advisers to demonstrate their value to clients and enhance their proposition along the way:

1. Cash will (initially) be king:

At the start of 2019 the temptation to move into cash will be very strong indeed for clients approaching or in retirement as market volatility and the uncertainty around Brexit continues. Advisers will have to be on their game reassuring them that their investments are suitable and that they should stick to their plan. The use of risk-based cash flow plans to illustrate the range of potential returns likely to be encountered and test risk capacity, will be invaluable in helping clients stay on track.

2. Change and yet more regulatory change:

January marks the first anniversary of MiFID II and the point at which firms have to start giving their annual suitability reviews and address their buy/sell/hold methodology. While potentially challenging given the work that is needed, this is also an opportunity to add further structured reassurance and demonstrate value against a plan which is suitable for the client’s risk profile. This is made far easier when using a technology-based investment process. In the Spring the FCA is due to review its thematic work on suitability.

3. Increased focus on developing retirement propositions:

While almost all firms have a centralised investment proposition (CIPs) few have something different for clients in retirement. With the challenges of sequencing risk, annual reviews and the need to generate regular income for clients over increasingly extended lifetimes more and more firms will build Central Retirement Propositions (CRPs) in 2019. For the early adopters, there is an opportunity to differentiate from peers and competition here and to attract new clients while extending services to existing ones.

4. Risk targeting will move mainstream:

Two years after the IA launched the volatility managed sector (and 4 years after DT launched its Risk Target Managed service) this approach to managing client money will finally come of age. A critical mass of major managers now explicitly target objective, independent risk profiles linked to the client’s agreed profile. Those funds targeting our own profiles already exceed £10billion from major managers. The range of outcomes experienced by the client become more certain as a result and the challenges of MiFIDII reviews and ensuring ongoing suitability significantly reduced.

5. Digital reporting accelerates as DB transfers reduce and FCA reviews FAMR:

While game-changing initiatives like pensions dashboard and open banking are on the bleeding edge of the industry for the time being, the need to reduce client cost to serve will be a priority once again. With the wave of DB transfers diminishing firms will return to a more normalised business model – one where the cost to advise and deliver an ongoing service become a priority once again.

The use of digital to automate client reporting, a key driver of cost, will accelerate as will the use of technology within the advice process with requests for clients to complete questionnaires online or elements of the advice process digitally growing exponentially. The FCA will be reviewing progress of FAMR in 2019 including Project Innovate and the Innovation Hub and so we can hope for continued support for technology in the advice process.

If you would like to speak to Ben Goss on any of these points please get in touch on via the contact details below.

Media Enquiries:
Joanne Macklin
PR Manager
Dynamic Planner
Joannemacklin@dynamicplanner.com
press@dynamicplanner.com
07813 192909

This year’s Dynamic Planner Annual Conference climaxed with a Question Time-style panel debate involving keynote speakers Alastair Campbell, Nic Coward and Ben Goss.

Conference host Simon Jack chaired the panel and invited questions from delegates in the audience. With such enormous and broad business and life experience on the panel, what ensued in the following 30 minutes captivated the Kelvin Lecture Theatre at the IET London.

Simon Jack (also BBC Business Editor): When we consider this whole issue around fake news and a lack of trust in media, one could argue Alastair that you invented fake news and encouraging the public to take their eye off the ball when you were a government adviser from 1997-2003. Did people first begin to lose faith in the government and media then; were you the original spin doctor?

Alastair Campbell (former Director of Communications and Strategy at 10 Downing Street): If I may say so, it is an argument I have heard before and I think it is a very self-serving argument for the media, and I will explain what I mean by that. I did the job that I did at Number 10 and it is a job that has been done by people since the beginning of time – advising leaders and people in positions of power. I was doing it at a time when the media world was changing beyond all recognition – because when I started out in my career as a journalist, what was the media? It was a newspaper you read or the news you watched once a day.

By the time I was in Downing Street and working in a very small team, we were dealing with a media which had grown exponentially and, what is more, had ceased to become merely purveyors of information, but more like political players. As that change happened, if we had not had a strategy in government to communicate our messages at that time, the media would have blown us away.

Look what has happened to Theresa May more recently: she can’t do it. She hasn’t got control of that landscape. She’s making it up as she goes along. It’s day to day survival for her.

Ben Goss (Dynamic Planner CEO): I am worried about fake news and the proliferation of the media, but if I try and put myself in a financial adviser’s shoes – and think about how I protect my reputation – there is essentially a line of argument in the press that goes along the lines of, ‘All financial advisers are scoundrels’. That has always been slightly true of our industry. If you have a financial adviser, then you absolutely trust and rely upon them to manage your investments wisely.

But it is really easy for the media today and on social media to attack what is ultimately a very close and trusted bond between two people, and say, ‘Look, you’re making money at someone else’s expense’. And most financial advice firms don’t have an army of spin doctors to help manage their reputation – and I worry about that. I think there is a role we can play here by producing more transparent client reports, which help show the returns you are receiving for the risks you are taking. That’s important.

Alastair Campbell: I think reputation is the most important currency there is. During Tony Blair’s government, I probably received more bad press than anybody, while today I get to earn a very nice living travelling all around the world advising people how to manage their reputation. Why do they ask me to do that? Because they think I have great experience in doing that in a very difficult environment – government.

How do you do that? First, you genuinely must not care about what other people say about you. If you do that and govern by what people who are likely to be hostile think, then you will stop doing things you think you should.

Arsene Wenger, the manager of Arsenal football club, said something incredibly insightful very recently. He said, ‘We’ve gone from a vertical world to a horizontal world’. In a vertical world, you have leaders who set the tone and direction and make decisions, which work their way down in society. In a horizontal world, we are bombarded all the time by the views and fake expertise of other people – but you can’t control that. All you can control is what you do and what you say, and in doing so shape the landscape. In that sense, modern media today is too noisy.

Ken Clarke said the other day that all MPs today are terrified of newspapers – but why? Politicians have got way more power if only they would see it and use it. In financial services and in every single walk of life today, it is the same. You have to break out of that mindset because if you allow the media and this culture of negativity to affect your judgement, you’ve had it.

Nic Coward (former General Secretary of football’s Premier League): I think it all comes down to your grand plan, your vision which grabs hold of people. I think a huge gap has grown in the UK between this current generation and the younger, next generation. For example, in the EU referendum, we had an older generation having a certain view of what Europe means to us now and in the future, compared to a younger view.

Alongside that and an issue which I think is acute to the UK’s economic future is pensions. Firms carrying large pension fund deficits nationwide removes our ability to invest in the future and in our children. Who has a plan to resolve that issue? I don’t think it exists and in sync with what other people have said, yes, there is too much concern with what the media will make of it and too little serious vision.

Ben Goss: What is interesting in the financial services industry is that the regulator does have a plan and getting us MIFID II ready before we leave Europe has been an important priority and the FCA has been very clear about that. We have all within the industry had to work incredibly hard to get ready for MIFID II at relatively short notice, so that there is harmonisation. You can see that not just in the UK but across Europe investment managers and financial advice organisations have had to raise their standards. I think generally that has been positive, because, in keeping with this conversation, if we were to ask firms, ‘Who are they most afraid of: the media or the regulator?’ I suspect most firms would answer, ‘The regulator’.

Simon Jack: Let’s take the opportunity to take some questions from the audience.

Q. A lot of people like me would like to do something to stop Brexit happening. But what can we do?

Alastair Campbell: The problem we have is that we are a parliamentary democracy and ‘our’ side of the argument, so to speak would normally be made by the opposition. But while the opposition in parliament continues to not make that argument, us Remainers are going to continue to be very frustrated. Ultimately, the Remain argument, if it is to be successful, has to move forward in parliament. David Cameron – and I don’t know how he feels about it himself – has set in train something that parliament can’t fix, because if we carry on in this vein we are going to do real, lasting damage to this country.

Simon Jack: What if say Vauxhall closes Ellesmere Port and specifically say it is because of Brexit? Is there any point or moment like that which forces a second referendum?

Alastair Campbell: There might be, but you could argue we have already seen plenty of significant moments like that. So what do you do? I think you have to stay angry about Brexit, be determined and continue to believe that you still have a chance of changing people’s minds. Yes, there are hardcore groups of people on both sides of the argument. But there are millions of people in the middle who have changed their minds. You have one-time Remainers who are now saying, ‘For goodness sake, get on with it’. And you have one-time Leavers who are now saying, ‘I’m really scared about this’. But if our political process is saying, ‘Under no circumstances will we allow this issue to be revisited’ then we have a problem with democracy in this country.

Nic Coward: Surely then this is the perfect platform for somebody charismatic to carry that widespread feeling and that momentum. But where is that person? And arguably where was that person making that argument on the side of Remain when we voted back in June 2016?

Ben Goss: I remember going to bed on the night of the EU referendum at 3am – we were holiday in the States – and I said to my wife, ‘Don’t worry, there’s no point buying US dollars. The pound will be back to normal in the morning’. However, it proved to be the most expensive holiday I have had in years!

There is no knight in shining armour here or silver bullet and Brexit is going to be messy and foggy and will be for quite some time. Again, if I put myself in the shoes of a typical client of a financial adviser, I am perhaps 55-60 years old and I probably am quite scared, because I don’t have much ability now to accumulate wealth in my lifetime – so sterling matters and the UK’s ability to trade matters. I think the only reasonable argument you can give at this time – and we have heard it from CIOs of our partners here today – is you need a diversified portfolio; you need to understand in absolute detail how much risk a client is willing but also able to take; and you need to position your client’s portfolio in a way which will achieve his goals come what may.

Making better financial advice available to more people is certainly a passion of mine. At Dynamic Planner, we are a technology company, so we invest in technology. Products like AccessAdvice hopefully show that you can reach the next generation of investors and the regulatory framework is moving in the right direction here regarding and encouraging the use of technology in financial services.

Simon Jack: Let us finish by going around the panel and asking for your reasons to be cheerful.

Alastair Campbell: I genuinely believe French President Macron is a very good reason for being cheerful. And I also am optimistic about the next generation. I think they want to get on; I think they are much more inventive than the current, older generation were at their age; they’re more sassy; and I think they will sort out the mess that we have made.

Nic Coward: My reason is a message: work hard, see the good in all people and everything will be alright in the end.

Ben Goss: I am cheerful because the early feedback we at Dynamic Planner have already had today is that our clients want us to do the things we want to do, which shows that we are on the right track and is a great source of positivity moving forward.

Simon Jack: My reason for being cheerful is that social media giants like Facebook are going to start ranking their searches in order by how much a website is trusted. In this era of fake news that can only be a very good thing.

Dynamic Planner CEO Ben Goss shone in a high-quality debate chaired by BBC journalist and news presenter Fiona Bruce at the Bankhall Annual Conference 2017.

Ben was one of four speakers on the Technology Panel Debate alongside Paul Armson, CEO of Inspiring Advisers, Intelliflo Executive Chairman Nick Eatock and Peter Billington, Head of IT at Bankhall. The title of the conference – held at Heythrop Park, Chipping Norton in Oxfordshire – was ‘The Past, Present and Future of Financial Services’.

Fiona impressed delegates with her industry knowledge and questioned Ben and asked each panellist to articulate their thoughts on key sector issues and challenges – including how technology in 2017 can help improve firms’ investment process; the potential risks with introducing technology to financial services; and their number one piece of advice for running a successful financial service firm today.

If you were unable to make the event on 23 November, below is a transcript of Fiona’s questions and of Ben’s answers.

Is it still possible for advisers to deliver a service which is solely face to face or have we now reached the end of that road? How has this traditional approach been affected by the challenges of ongoing client servicing?

Running a manual, face to face business today in a digital world is increasingly unprofitable and risky. The regulator since 2011 has published guidance on how to deliver elements of financial planning using FinTech and I have heard them say they do not believe it is possible to run a sustainable business without it. If you look at FAMR and the guidance on suitability, it is all designed to be delivered with tech.

MiFID II requires suitability reviews to be completed annually from 3 January 2018. Unless you are running an extremely high net worth business, it will be virtually impossible to service your clients without using technology in your investment process.

The final challenge is reaching the next generation and lower balance clients. Again, it is not possible to profitably achieve this sustainably. More digital interaction, whether that is through digital servicing or automated advice for simpler needs such as ISAs, is now happening – and through firms such as Dynamic Planner and IO is now possible through your current technology partners.

We all agree that using technology can add to business efficiencies and improved customer outcomes. What tips can you provide in using technology, from the first client meeting through the full client advice lifetime?

I have seen many of our clients adopt the use of technology as part of their process. Far from getting in the way of the process, like the old point of sale machines, the use of an iPad app for example, to explore risk and return is seen by many, many clients as professional and actually expected. It makes your firm look good.

The key though is that your investment process has to be joined up. That means no re-keying data from advisers’ meetings with clients. Systems need to talk to each other.

It also means that your asset and risk model needs to be joined up. The way that you describe risk to your client needs to be the same as the way in which the investment risk is assessed and that needs to be consistent with the way in which the investment risk is reviewed as part of the servicing plan. Risk comparisons need to be on an apples for apples basis. You cannot have lots of different systems each with a different definition of risk. That introduces the possibility of very serious systemic risks for your business.

Because it cannot all be good news, what risks does technology bring to the advice industry, distributors, and the customer?

I will come back to the risk I mentioned earlier. The risk of introducing a systemic error into your business is clearly heightened when you use tech in your investment process. If the way that you assess risk with the client is different to the way in which you assess the risk of the investment, then you run the risk of mistaking apples for oranges, so to speak.

I think the key to managing this risk is to do your due diligence on the processes being used to assess risk and to make sure that they join up. Look at the history of the asset and risk model you are using: how did it perform during the 2008 crash for example? Ultimately, your firm is responsible for the advice, so this due diligence is key. Any good provider will be able to answer these questions for you and furnish you with the right information.

To run a robust, compliant, profitable and as far as possible future-proof advisory firm, what one tip would you give business owners in the audience today?

Firms often do not know where to start when it comes to FinTech in the advice process – it can be a bit of a Rubik’s Cube. My tip would be to sit down with a sheet of paper and pen and simply sketch out your current investment process – from risk profiling the client, deciding asset allocation, building, and managing portfolios, and then stand back and make sure you are confident that there is a consistency of risk assessment through the process and that ideally data is not being rekeyed. If you are happy, you are in good shape for the future; if not, sketch out what ideal looks like. If you are not sure, talk to your Bankhall RMs. They should be able to help you through the work that we do with them.