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In a future age

Alan Sheriff and David Taylor outline what a “Day in the life” might be like for a hypothetical financial planner in the 2020s, and give a broad outline of how the industry could evolve to that point from today.

Fara swung her car seat around to talk to Alex about Mr Robins: “He’s coming in for a review today. He’s old school; wants to look me in the eye while I talk him through the projections. He’s also got some things about his family and his business that he wants to go through.” Outside the traffic was humming smoothly into town and their car whispered something about arriving at the office in 15 minutes. Alex casually swiped the windscreen to bring up a view of the Robins household finances. “Well, I can see that he loves Jaffa Cakes, so get plenty of those racked up because I can also see he’s got a retirement shortfall of £60,000, which isn’t great news. But… I just saw something that we can try…”

Meanwhile, the car decided it was low on juice, so they had a few extra minutes to discuss the Robins family while the car recharged itself. “You see this,” Alex gestured at the news panel; “SaverSoft has released a major upgrade to its PensionAgent on the UK Pensions Ledger. It’s got 98% up-ratings and SaverSoft claim it’s turning up thousands of forgotten legacy policies from that bunch of closed book providers they’ve finally managed to hook up. Well, Mr Robins turns 62 in a couple of weeks’ time, so you never know, he might have one of those.”

That morning Fara showed Mr Robins how to authorise the PensionAgent and, sure enough, a £45,000 pot from his early days in accountancy materialised on the firm’s Pensions Dashboard. That would help. Within minutes they had transferred it into his portfolio, re-checked his risk profile, made an informed asset selection and invested immediately in more smart bonds and equities through the NextGen investment platform that was plugged into the firm’s system.

Save a fortune

As well as finding forgotten money, Mr Robins would also save an absolute fortune in charges. That old legacy pension had been paying incredible annual management charges of 2% and now those charges would be slashed to a sensible 0.2%. Fara couldn’t get her head around what people used to pay for those ridiculous layers of administration. Mr Robins had quite a few more things he wanted help with, and put Fara in touch with his daughter Danielle right away. She’d just started a new job and needed financial help. “How would you like to meet up, Danielle?” Fara messaged. “I can schedule a meeting in your vPlan and we can take a look at what you’ve got?”

vPlan is one of several Virtual Reality financial planning tools now available and Fara’s firm had recently licensed and plugged it into their system. They could stroll together around Danielle’s finances to look at how her savings were doing and then decide where best to invest the extra savings she hoped to put aside from her new job. They could also quickly review her goals and check her life cover. Most people really like this sort of thing nowadays, though some, like her father, still prefer to look at printed charts and tables. Danielle is still early in her career but these days, high-quality financial advice is accessible and affordable by everyone. Powerful, data rich, intelligent, simple to use, low cost systems mean that financial planning firms are incredibly efficient and engaging for their clients – in person, in car, laptop, tablet, mobile, watch, social media, VR, AR – the flexibilities are endless.
There is plenty of help for everyone, however and whenever they need it. Many people still like the personal touch, though most prefer to self-service with online guidance and the reassurance that a professional is keeping an eye on their financial affairs and can proactively step in when needed.

Popular and trustworthy

The efficiency and transparency of the investment market means that it’s popular and trustworthy in the 2020s. Every transaction is ultra-low cost and automatically monitored in real-time by the regulator. So Danielle is confident that whatever advice and service Fara provides, it will be guaranteed rock-solid and fair. Financial planning is a first-class profession; necessary, affordable and trusted by everyone.

Mr Robins owns a construction services business, employing 35 people. Approaching retirement, he wanted help thinking through how to tax-efficiently pass ownership on to his family. He’d heard about family trusts: would one be suitable? This wasn’t within Fara’s area of expertise, so she scheduled an appointment for Mr Robins with her qualified colleagues at his favourite coffee shop. With his permission, they were able to access all the relevant data about his business and personal affairs along with tailored analysis provided by their in-house expert system.

He’d been asked by one of his employees whether Fara’s practice could offer guidance on savings plans. They’d helped set up the occupational pension scheme and Mr Robins had heard they now have an online channel tuned to help construction industry employees with their financial needs.

Mr Robins was also dissatisfied with his firm’s risk management arrangements. They had the usual insurances in place, but could their approach to risk management be more dynamic? They had substantial assets that could be used better. By the end of the morning the Robins family had scored Fara 120 more reputation points. She could put them towards her annual bonus, trade them for air-miles, car time, Amazon Dollars or invest them.

Everything has a value now, tied directly to your unique identity and totally under your own control. This also means that there are now a whole multitude of new digital asset classes and instruments that simply didn’t exist a decade ago, making the role of the financial planner so invaluable in helping to make sense of them. Fara glanced at her tablet to review her next client, ate Mr Robins’ last Jaffa Cake, topped up her coffee and tapped the dashboard. “Hello Mrs Siddique, how’s Anisha getting on at uni? Great. Now, thanks for taking my call, we’ve noticed a great opportunity for you guys …”

Looking back, Fara realised many big challenges had been overcome

The financial services industry had worked hard to give Fara such a rewarding career. The industry had become massively layered, with customers supported by advisers who placed investments on platforms and in product wrappers, with underlying funds handled by asset managers serviced by further layers of transfer agents, custodians and banks which traded and settled transactions.

A whole infrastructure of messaging and data transfer enabled this to happen relatively securely but at great cost and expense as the mass of data maintained by every company at every layer of administration had to be continuously reconciled. From 2015 there had been much hype and scepticism about blockchain. What could blockchain technology (aka “distributed ledger”) do that existing database and messaging technology couldn’t when it was implemented with robust market practices and standards? The advantages of decentralised, shared industry asset ledgers, accessible to all authorised counterparties became increasingly clear through industry experimentation.

The data recorded on these ledgers was validated by technical consensus and the entire transaction history was traceable. Security was no longer a thin, hackable veneer, it was now assured by encrypting all data and transactions. By the 2020s, vast swathes of administrative overhead had been removed by introducing high volume, streamlined, peer-to-peer industry data collaboration, with no need for the trusted intermediary services previously used for clearing and settlement. Trust was delivered by technology.

In 2016 the fintech revolution motivated the UK asset management industry to kick off an ambitious  collaborative initiative that led to unprecedented transformation. Meanwhile, within banking, a blockchain-inspired global consortium formed to deliver the idea of encoding and automating financial agreements on a new decentralised, collaborative, global banking network. The real step forward came when these groups collaborated. From 2017, many players needed to renew their life-expired systems. The price tag was unpalatable.

The industry had to decide whether to replace existing systems with more of the same, or do something transformative. It confronted the threats and took the opportunities presented by deep digital transformation.

New profession emerges

The legal profession had to keep up. It learned how to interpret and write the computer code that was increasingly used to create financial agreements and instruments. The new profession of legal programmer emerged. The growing reliance on open source software boosted that the legal status of licensing agreements needed thorough examination, in particular to manage and mitigate the potential viral effect on licensing agreements.

Despite the launch of the FCA’s Project Innovate in 2014, many believed that the regulator would struggle to keep pace with digital transformation, and would put the major brakes on adoption. In time the doubters were proved wrong as the regulators and tax authorities came to fully understand how technology would help. They actively engaged with the industry to radically adapt the way regulatory reporting, conduct of business and other rules would operate.

Once all financial data was transparent to the regulator, regulatory reporting ceased to be an industry burden, investor protection was greatly strengthened and prudential conduct considerations more easily satisfied. The investments industry became democratised and affordable to the masses. While consumers were unaware of the industry stack revolution, they certainly noticed how the industry was now engaging with them. For the digital-native generation born in the 2000s, digital-first was natural.

By the 2020s secure, intelligent digital wallets had become the normal point of engagement for personal finance. Early efforts to financially engage consumers through social media felt intrusive but from within the money-oriented environment of digital wallets, certified and trusted professional help was welcome. Natural language interaction with devices became commonplace, replacing apps and websites to automate routine transactions: “How much spending money have I got left this month?”, “£310. Would you like to save £50 for the future?” “Yes, why not, go ahead”. But that was just for the easy stuff…

The fast-moving, complex, dynamic nature of work and life demanded widespread affordable, professional financial help. The rise of increasingly intelligent self-service portals (“robo-advice”) was initially seen as a threat by paranoid professionals and the media, but as the cost of advice and investment plummeted with automation, a much larger, cross-generational group of clients could then be sustainably and profitably managed.

Boundaries Dissolve

The boundaries between certified financial planning, chartered accountancy, tax and legal practices began dissolving as technical advances in their administration systems meant that financial professionals could access increasingly joined-up services.

The wholesale move of data into the cloud unleashed powerful new data-driven, machine learning processes working 24/7 to discover new patterns that led to the creation of valuable new service propositions. Interestingly, firms could differentiate themselves through in-depth training of their own expert systems in their market niche. Customer needs could then be anticipated proactively and highly specialised professional help offered precisely when needed, not just at the annual review.

The confidence created when trusted financial brands used technology to put their customers first, generated widespread consumer adoption. Truly integrated, cross-practice working had arrived and delivered for their customers. Valuable independent financial planning, tax, accounting and legal advice could be provided simply, affordably and exactly when needed.