Emma Ann Hughes reports on the key takeaways from the latest PFS virtual conference
Financial planners who wish to secure their own financial freedom must inform and empower clients to confidently gain control over their financial future.
This was the key takeaway from this year’s PFS virtual conference. The event in November – attended by more than 1,100 delegates – saw an array of experts gather to share their wisdom on how financial planners can strengthen relationships with clients living in a fast-changing, seemingly uncertain world for the last few years.
Here are three lessons learnt from this year’s conference, which was held in association with Just, M&G and Royal London:
1 Be a calm voice in the storm
Justin Urquhart Stewart, co-founder of 7IM, kicked off the conference by pointing out that many financial planners will have clients who are fearful as a result of what BBC newsreader Huw Edwards is telling them most evenings about the current state of the world. He joked: “Listening to a depressed Welshman on a regular basis isn’t good for you.”
He said financial planners will have a key role to play in cutting through the negative noise and calmly explaining to clients that the economy is still growing – albeit with issues – and reassuring them that in their professional hands, they are in the best possible position.
“Whatever your views on things like Brexit and the pandemic, which has been horrific for so many people all round the world, we are now in a position where the global economy has bounced back,” he said.
“The global economy is showing signs of stuttering and we are going to have to live with something a whole generation hasn’t had to live with before – inflation. People are also coming up with an old word I haven’t heard for 30 years now, which is a combination of stagnation and inflation – stagflation.
“Having to manage inflation is going to have an impact on what the Bank of England is saying and already you can hear noise about interest rates rising. We want interest rates to go up to something nearer to normal. We are still on emergency rates for the time being and that has to change.
“These are points that financial planners know, comprehend and appreciate, but clients, the public and politicians don’t really understand it. They will need people who can speak clearly, simply and honestly to them about what the impacts are.”
The need for financial planners has never been greater but as PFS president Sarah Lord explored during her keynote speech, if the profession is to assist a growing proportion of the public, more advisers are needed and those currently in the profession need to take steps to secure their own financial future.
2 Build your own lifeboat
Ms Lord’s theme for her presidency is building a strong, sustainable and profitable profession and during her speech she shared guidance with members on how this can be achieved.
“There will always be challenges such as downward pressure on fees, increased regulatory scrutiny and professional indemnity challenges. As a profession we can minimise the pressure if we remain focused on our future sustainability,” she said.
Ms Lord highlighted three core aspects of sustainability. Firstly, attracting and retaining the next generation of financial advisers is essential if we are to bridge an advice gap that is only likely to widen, due to the number of professionals planning to retire in the next decade.
She said: “The pandemic has heightened society’s awareness around the need for financial confidence. More individuals than ever are seeking advice.
“We need to be doing all we can to promote the fantastic and rewarding careers that can be achieved in financial planning, through the various pathways such as academies, graduate programmes and apprenticeships.”
Secondly, Ms Lord said it is vital that financial planners ensure they have resilient business models and can continue to evolve and adapt to changing client needs.
She said: “The pandemic created a fundamental shift in how technology is used, in business and by society.
We must continue to embrace technology to drive efficiencies but also to ensure we continue to meet the needs of our clients.
“In the past, it was often thought that clients only wanted to meet face-to-face, but that has changed and we are seeing clients who are now more comfortable with virtual delivery. Of course, that is not to say there isn’t still a need for that personal face-to-face interaction. The traditional client – often described as the Baby Boomer – is now looking for a human-driven but technology-enabled experience, whereas the next generation of client is looking for a technology-driven but human-enabled service.
“As we need to continue to attract the next generation of clients, businesses need to get that balance right between the use of technology to meet business and client needs, without losing the personal touch.”
Thirdly, Ms Lord said client relationship sustainability is key if the financial planning profession is to secure its future: “Too few businesses appear to have a plan in place for transitioning the client relationship, ahead of an adviser retiring.
“We all know money is such a personal thing and often the client has spent many years working with an adviser, building complete and utter trust in that relationship, so working with a new adviser can be a massive thing for them.
“It takes time to build a rapport and trust, so in an ideal world there should be a plan for transitioning the relationship over a couple of years, but often that is not the case.”
Ms Lord said there also needs to be a focus on the next generation of client and what they are looking for in their relationship with a financial planner.
“The intergenerational wealth transfer is now upon us. It is happening, so we need to ensure we are attractive and do have appropriate experiences for that next generation of client, so we can maintain relationships when our clients, the traditional clients, pass the wealth on to the next generation,” she explained.
By securing their own financial future through attracting fresh talent, building resilient business models and focusing on the client relationship, the profession will be well placed to help a growing number of individuals feel in control and able to achieve their goals.
3 Shine a light in the dark
A panel of financial planning professionals discussed how planners can deliver clarity for clients about how they can secure their financial future.
Matthew Aitchison, managing director of Clear Vision Financial Planning, shone a light on the power of cashflow planning to change lives, by sharing his work with a couple in their mid-50s with children.
The wife was made redundant and had received a payout, while the husband was still working in a stressful job. The pair revealed they wanted to buy a campervan and travel around Europe but a previous financial planner they met with had focused only on consolidating pension pots.
When Mr Aitchison used cashflow planning software, this allowed conversations about whether they could downsize their current home, sell rental properties, reduce their exposure or increase their risk to achieve their goals.
The initial advice from Mr Aitchison was to pay voluntary contributions to top up the wife’s state pension, sort out the investment strategy and pensions then progressively fund the husband’s workplace pension plus the sale of two rental properties – one at age 62 and the other at age 70 – with the proceeds to be invested.
They still had their main home and holiday home with those actions.
But the reassurance offered by that initial conversation with Mr Aitchison pushed the pair further towards greater financial freedom. He said: “The clarity gave them the confidence to think bigger. We didn’t entirely scrap that original draft plan but the husband resigned immediately, they sold their family home and moved back up north to their roots. We reran the cashflow, to make sure it all works. Now they have bought a campervan and are ready to go.
“They have a different lifestyle in the countryside now and he looks so much more relaxed, spending time outside, tinkering with engines.”
By bringing their future to life, the cashflow planning software combined with Mr Aitchison’s advice gave the pair the information and confidence to take transformative action.
Mr Aitchison said: “When they came in, it was clear the wife dragged the husband in to sort out her finances, but we engaged them. We could dynamically model changes in the meeting and brainstorm together. This is something robo-advice just can’t do.”
To watch the PFS Financial Freedom conference on demand, and earn CPD, visit: www.thepfs.org/events/financial-freedom
Emma Ann Hughes is communications director of the PFS