The need for financial advice is growing and is likely to continue to grow for many more years. This is true across the entire market. It is true for those in the ‘advice gap’, whose investable assets may be fairly limited, and it is true for the relatively affluent, individuals and families who may have liquid assets up to £3 million or more.
Advice is no longer just about making good use of surplus financial assets. It is increasingly critical to life outcomes.
Even a well-off individual, in a world of low returns, needs to invest sooner rather than later if they are to meet the significant costs of education, a family home and a comfortable retirement. Those fortunate enough to have a good income, and savings supplemented by inheritance, still have the complexity of managing their wealth through retirement and into later life.
Most people nowadays will come to retirement with several pots of money. These may include two, three or even more defined contribution pension schemes, an accumulation of individual savings accounts (ISAs), many with different mixes of cash, shares and bonds. Then they may have general investment accounts, savings on deposit, rental properties, private business interests.
In the context of a self-funded retirement and longevity expectations ranging from 20 to 40 years, retirees need a carefully planned, well-managed investment strategy that has a high probability of lasting several decades and through very different and unpredictable economic cycles.
These challenges have been a long time brewing. It was an awareness of the complexities of self-funded retirement in a time of modest investment returns that drove the reforms commonly referred to as ‘pension freedoms’. The social implications are not lost on politicians and regulatory scrutiny is only likely to get more intense.
In this world of the future, good financial advisers will likely be in great demand. This comes at a time when the industry is quite literally maturing. According to a recent report, some 15,000 advisers are expecting to retire in the next 5—10 years, a depletion of an astonishing 60% of the current profession1.
What will happen, what needs to happen, what is already happening, is that the industry will evolve to meet the challenges that stand in front of us. New entrants are coming into the market and will continue to do so. These range from large asset managers to execution-only brokers to fintech start-ups.
The delivery of advice is likely to fragment, between personal advice, pure automation and hybrid versions that combine the two. The divisions will not always be clear cut. According to Vanguard’s own research, existing advisers that emphasise personal service are leading the way in bringing automation into certain areas of their practice2.
Our view at Vanguard is that the development of a variety of delivery channels should be good for the industry and, most importantly, good for clients. It should help to bring what is increasingly an essential service to those at the lower end of the market, who are currently excluded due to pricing. It should also help to draw in the young, who need to invest sooner rather than later, and who may graduate to more sophisticated services as time goes on. For the affluent it should help to bring a good range of meaningful choices.
Vanguard’s story in the UK began through our partnership with financial advisers, a strategy to which we remain wholly committed. What we are now calling our Vanguard Advantage Adviser Support draws together the four key strands of that relationship: research and commentary, professional development, client resources and portfolio services. We have invested and continue to invest in all four of these areas.
In research and commentary, we have always supported clients with analysis of critical trends in markets and economics, while sharing our research in areas such as Adviser’s Alpha, portfolio construction and retirement planning.
In professional development, our weekly briefings through the Covid-19 crisis attracted record audiences and we have now increased our CPD-accredited Adviser Webinars to twice-monthly, sharing our best ideas from across Vanguard.
In portfolio services, we have expanded our team of consultants and restructured their offering to make it more accessible to a much wider range of advisers. This has proved a popular service, helping advisers to identify gaps and concentrations in their portfolios that might lead to unintended consequences, and where appropriate suggesting alternatives. Bespoke consultation is also an option.
The world is changing. Achieving investment success is becoming more challenging. Good advice will be more in demand than ever, and more valuable than ever. But opportunity comes with risk. Our hope is that UK advisers will come to Vanguard not just for our funds but to draw on the tools and expertise that sits behind those funds, and that this will be the basis of a partnership that promotes the wealth and wellbeing of your clients.
2 Vanguard 2018 UK Adviser-Client Survey
This document is directed at professional investors and should not be distributed to, or relied upon by retail investors. This document is designed for use by, and is directed only at, persons resident in the UK.
The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions.
Issued by Vanguard Asset Management, Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.
© 2020 Vanguard Asset Management, Limited. All rights reserved.
Vanguard Asset Management, Limited. All rights reserved.