What will the Financial Broker market look like in 2030?

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Last month I introduced a research project that I was fortunate to deliver for Brokers Ireland with the aim of developing a future-facing view of what the Financial Broker sector will look like in 2030. The primary purpose of the research was to inform Brokers Ireland as to how they can shape their own objectives and optimise their support services to best meet the needs of their members, and to consolidate and grow their positioning as the leading representative body for Financial Brokers in Ireland, and indeed as the voice of the sector.

In last month’s article we looked at the market today. Now we’re going to take a leap into the future and examine some of the key themes that the research revealed as to how the market will look in 2030.

The general outlook

Overall, the future demand for financial advice is expected to grow, with the future for Financial Brokers looking bright. This positive outlook is shared by Financial Brokers themselves. In a survey carried out in 2022, almost 50% of them agreed with the statement ‘The future is very bright for Brokers, I expect the market share of Brokers to increase’, with only one in five answering negatively to it.[1] Brokers currently enjoy a market share of approximately 74% and there is every expectation that this share will remain stable in the coming years.

This positive outlook in relation to the demand for advice and to the independent advice sector is shared across all global markets. As consumers make transitions throughout their lives and indeed as regulation, products and the financial backdrop within individual markets change, there is a need for expert independent advice to optimise consumer outcomes.

The biggest cloud on the horizon for Financial Brokers may come from the broader economic environment, with the outlook looking quite gloomy today. However, time and time again Brokers have demonstrated their resilience in dealing with negative external forces. The political landscape in Ireland could also experience significant change over the next decade, with some consequences for the sector.

Preventing an advice gap

The greatest challenge in relation to the demand for advice is reaching people who have never interacted with a Financial Broker and are unaware of the benefits this can bring. This challenge is one that exists in every corner of the world. As an example, it is estimated that 83% of the population of the USA have no adviser. Since the Retail Distribution Review (RDR) was introduced in the UK a decade ago, one of the major impacts has been the narrowing of the financially advised population. Similar trends have been experienced in other markets, as consumers are unaware of the value of advice and advisers cannot deliver advice in a profitable way to consumers with more limited financial resources. This has to be one of the biggest challenges for both Financial Brokers and regulators in Ireland – preventing an advice gap widening in Ireland.

In building relationships with new consumers of financial advice, the challenges of engaging the younger generations and engaging a more diverse audience were noted. These themes will be examined in more detail in future articles.

The target markets of the future

While there will be some exceptions of successful, scaled businesses with large client service machines enabling them to reach a wide group of clients, the expectation is that the Financial Broker of the future will work predominately (but not solely) in the mass affluent and high net worth segments.

The sense of most people, and lessons from other markets, is that the successful Financial Brokers of the future will be ones with deeper propositions, offered to narrower target markets – their goal will be to look after all the needs of some people. Being expert with such groups enables an advice firm to stand apart from their peers and be the ‘go to’ expert in that market. The likelihood is that Financial Brokers will seek to differentiate themselves from their peers through deeper knowledge of specific client groups or by demonstrating superior expertise in specific product areas.

The importance of every Financial Broker having their own business proposition that is then rolled out to their customers was a recurring theme. The future of successful Financial Brokers is unlikely to be as ‘product takers’, with their proposition simply being an additional advice layer to the product offerings of their favoured product provider. The expectation is that technology will play a far greater role in the delivery of advice by Financial Brokers. Again, these themes will be examined in more detail in future articles.

The 3 big questions

Over the next editions of newsletters, I’m going to examine each of the 12 ways that were identified as enabling Financial Brokers to prepare for 2030. Each of these will help you to answer the three most important questions for your business,

  • Who your clients of the future will be
  • What services you will offer
  • How you will deliver these services

[1] Brokers Ireland Financial Broker Survey Report 2022

The Financial Broker market in Ireland today

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We were delighted to be asked by Brokers Ireland in 2022 to complete an extensive research project to develop a future-facing view of what the Financial Broker sector will look like in 2030. The primary purpose of the research was to inform Brokers Ireland as to how they can shape their objectives and support services to consolidate and grow their positioning as the leading representative body for Financial Brokers in Ireland, and indeed as the voice of the sector.

A secondary piece of work was also commissioned to extract the key learnings from this report, with a view to helping Financial Brokers prepare your own businesses for the future.

The research methodologies included focus groups with Financial Brokers, interviews with senior executives from product providers, interviews with other service suppliers to the sector and interviews with experts from five developed markets outside of Ireland – namely the UK, USA, South Africa, Australia and Canada. This was further supplemented by structured consumer research and online survey research carried out with Financial Brokers. Extensive desk research was also carried out to build out a comprehensive view.

Over the course of the next year or so, we will share the key findings from this research, beginning below with a piece about the advice market as we see it today.

 

A market in rude health

Financial Brokers in Ireland are the dominant distribution channel and source of financial advice and personal financial products for consumers in Ireland. When investment-only business is excluded, the channel currently commands an estimated market share of 74%. This is a significant increase on the Financial Broker market share that had fallen to 54% before the financial crash in 2008. Financial Brokers have demonstrated your resilience and value to consumers over the last 15 years.

The overall personal finance market in which Financial Brokers enjoy a commanding position has been very buoyant in recent years. The market experienced growth overall of 23% in 2021, which continued with further growth of 23% in the first half of 2022.

 

The changing role of the Financial Broker in Ireland

While the core role of Financial Brokers as the primary source of expert and independent financial advice in Ireland continues, several factors have fundamentally changed the business models for many of you. These changes have been largely positive and have enabled you to grow more sustainable and valuable businesses. They include:

  • The growth of trail commission as a mainstay of the remuneration model of Financial Brokers.
  • The negative deposit rates (that are currently inching upwards again), offering good opportunities to Financial Brokers to offer better saving and investment alternatives.
  • The growth of financial planning as part of a deeper service proposition.
  • The impacts of COVID, which resulted in Brokers embracing process improvements in the shape of remote meetings with clients, the use of digital signatures etc.
  • The upskilling of Financial Brokers in the form of professional education qualifications and the use of technology in areas such as future cash flow planning.

The general opinion among interviewees is that Financial Brokers simply have a better value proposition than other channels such as banks, direct sales forces and online providers. Your personal touch, your independence and your comprehensive offerings enable you to stand apart. The resilience and adaptability of Financial Brokers was also remarked upon on numerous occasions by interviewees. A recurring theme was that the future of Financial Brokers constantly seems to be threatened by some external force, but you continue to manage hurdles in your path, survive threats that you face, and ultimately thrive.

 

The Financial Broker market globally today

Generally, across the world, the independent financial adviser markets are in rude health. Several common themes emerged in relation to those markets today.

  • Reaching the non-advised community is the biggest challenge facing the sector globally.
  • There is an ongoing drive for increased proficiency and upskilling globally within the profession.
  • The older age profile of advisers and the challenge of bringing in new blood is an ongoing concern in all markets.
  • The enormous and disproportionate burden of regulations and compliance requirements that are faced by often “micro-businesses” is a significant issue for the sector.
  • All markets are experiencing an ongoing drive for increased transparency for the benefit of consumers.

Next month, we will set out a summary about the expected evolution of the market over the next 7-10 years. Following that, in each of our subsequent newsletters, we will share one of twelve action areas for Financial Brokers to prepare your own businesses for 2030. These action areas are also contained in an information guide that Brokers Ireland have produced for Financial Brokers.

We hope you find this research interesting and thought-provoking.

Different people deserve different things.

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How many clients have you? 200, 500 or 2,000? Often as your client base grows, it results in your number of staff growing. But the chances are that even with your increased staff numbers, you are unable (and unwilling) to provide a top-drawer service to every one of these clients…

Really the question is – why should you? After all, you derive hugely varying levels of income from each of those clients so surely the clients that are driving very high levels of income to your business deserve a higher level of service?

Of course this is not at all a novel concept! Every time you step on a long haul flight, it’s immediately obvious. Turn right for the cheap seats in Economy or turn left to be pampered in Business Class or 1st Class. And then when you book a hotel, you can pay less for a standard room or pay more for a suite with all of the bells and whistles that come with that.

Now let’s take this concept into the financial advice space where for many of you, your remuneration model is built around trail commission. If I’m fortunate enough as an investor to come to you with €1 million to invest, your trail commission might be €5,000 p.a. (assuming you charge 0.5% of assets). That’s fine if your proposition stacks up.

But what happens if I decide to place just €200,000 of my money with you? Now your trail commission falls to €1,000 p.a. Still very attractive, but obviously not as nice. However the question that’s in my head is, “What extra am I getting from you by placing the full amount with you, that’s giving you the benefit of an additional €4,000 p.a. of my money?”

If there is no difference between the services offered in each of these situations, I suggest you’ve got a challenge on your hands… Simply adding trail commission to policies without thinking through your client proposition is fraught with danger.

Not completing a robust segmentation of your clients is also very dangerous. Even without doing a segmentation exercise, I’ve no doubt that a small number of your high value clients get your best service at all times. But inevitably what happens is that there are other high value clients that slip off your radar. Either you don’t realise that they are high value or they just aren’t demanding. This is aside from some low value clients who are constantly on the phone end up getting a huge amount of attention. That’s hardly fair, is it?

So what do you do?

 

Segment your clients

For starters, do a proper segmentation exercise. Know who is valuable to your business and who is not. Don’t be put off from doing this work with the excuse of “it doesn’t capture the full picture”. Yes, there will always be exceptions within your segmentation – for example a client with very little business with you, but who constantly refers other clients to you is actually a high value client to you and should be treated as such. But don’t start with the exceptions; work out how to deal with them later on a case-by-case basis.

I’m definitely not suggesting that client segmentation be based on asset values alone – that is only one factor to be considered and used. However it is usually one of the more heavily weighted factors used by advisers in segmenting their clients.

 

Develop your service packages

Develop service packages for your business that reward clients depending on their value to your business. Make your high value clients feel really special, reward them for trusting you with their money by giving them a truly rewarding client experience. Build a moat around them and pull up the drawbridge from your competitors by providing a second to none service.

Let your mid-tier clients feel valued by your business, while making them aware that there is lots more you can do for them (if they are willing to pay for it).

And of course your no/low value clients will begin to realise that it’s a business you are running and that they don’t have 24/7 access to you. If they want access to superior service (ongoing advice from you), they pay more for it. The same as when they book a flight or a hotel room.

 

Don’t be afraid to say no

Yes, your lower value clients may want a better service possibly than you are offering and might try to demand it from you, without paying for it. Don’t be afraid to say no. You’ll only be doing this with your no/low value clients… And they are of little or no value to your business. Put your time into those clients that are of value to you – this is what your clients deserve and what your capacity allows.

The days of a “one size fits all” approach are over. Give your clients a service that they want and deserve.

 

Great leaders achieve great things

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…and great financial planners achieve great outcomes for clients.

As the awful and unnecessary situation in Ukraine continues to unfold each day, most Ukrainians and other observers have been hugely impressed with the leadership qualities of Volodymyr Zelenskyy, the president of Ukraine. Wars are won and lost by clever leaders. Irrespective of the external factors that actually caused the war, they never just wander into it and start fighting. Instead they carefully consider all of the external factors that will impact their success – the strength and equipment of their enemies, the conditions and terrain on which the war will be fought as well as the weather and other factors that have the potential of impacting their success in the fight. We’ve seen in Ukraine the power of good communication and engagement with allies and friendly countries.

Of course the key factor that they consider is the strength and capability of their own forces; the size of their army, the weapons available to them and the different tactics that can be deployed. In short they take a very strategic approach to the battle. Generals also know that battle conditions are an ever-moving feast – things just don’t stay the same. The battle conditions change, the strength of their own army and that of their enemy change and of course progress towards their overall goals either improve or recede. As part of this, they consider the risk attaching to different tactical options open to them – do they risk lots of men and equipment for a particular short-term strategic objective, or do they wear down their enemy through sustained and slower-moving fighting?

This is where their real expertise comes to bear, adapting to changing conditions. This is also where disastrous mistakes are made – I’m showing my age here, but just consider the decision taken by the German generals in World War II who decided in the Battle of Britain to stop bombing airfields and instead to start bombing cities. This gave the Allies valuable time to rebuild their air force and fight back. And then as the German advance stalled later in the war, the Allies planned and executed D-Day, the ultimate turning point in the war. Clever generals achieve their country’s goals and win wars.

And clever financial advisers help their clients achieve their goals and achieve financial independence. You do this in the exact same way as military leaders go about their job. You first of all understand what the objectives are, what is the desired end state. You then consider risk and how much is appropriate for each individual client and situation. You then consider the current external conditions and most importantly the current financial strength of your client. All of this is then evaluated and captured in the financial (battle) plan to get your client to their final objective.

Of course your real strength, just like a general’s, is that you recognise that the battle has now only just begun. From the day you develop your client’s financial plan, conditions start to change – in the external environment, the client’s own circumstances or indeed the end objective. Your real value is in the ongoing evaluation of these changes, and the adaptations and tweaks that you make to your client’s plan and the tactics (products?) that you’ve deployed to achieve their end goals.

Sitting at the heart of this is the client’s future cashflow plan, as this clearly demonstrates the current and future financial firepower of your client to achieve their ultimate objective – a bit like winning the war… Your client will see whether they need to take more risk, strengthen their resources (save more money) or maybe rein back their ultimate objectives ( similar to seeking a peace deal). Hopefully this latter situation will unfold in Ukraine very soon.

 

So if your clients are unclear about the value of a financial plan, it might be time to gently guide them that without a plan, good outcomes are unlikely to be achieved.

Are your Calls to Action working?

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When helping financial advice businesses review their marketing approaches, one of the foremost digital assets that gets a lot of attention is of course the company’s website. While there are many aspects to reviewing a site – the design, ease of travel through the site, quality of content and search performance being among the main areas, the subject of Calls to Action (CTA) usually is an important discussion too.

CTAs are a critical element of a website. After all, that’s what you want – the visitor not to leave, but to act. Here are a few thoughts to consider, when trying to encourage visitors to your site to move to the next stage through your sales funnel.

 

Remember AIDA

When it comes to the journey a person will go on before eventually becoming a buyer of a good or service, AIDA is an often-used acronym. It stands for

Awareness

Interest

Desire

Action

People will land on your website at different stages of the buyer cycle. Some will stumble across your website and are at the Awareness Stage. Others may be further along – for example they may be ready to do business with you and are at the Action stage. Others again may be at the interim stages of Interest or Desire.

The key for you is that there is a relevant CTA, no matter what stage of the buyer cycle the visitor to your website is at. Think through the various CTA options available to you and seek to provide a relevant action for all visitors. These might include,

  • Subscribe to a newsletter
  • Download a whitepaper
  • Submit an enquiry
  • Book a meeting
  • Speak to someone via phone or chat functionality

 

Make sure your CTAs are seen

This is probably the greatest source of frustration. An adviser goes to the trouble of developing a really engaging set of CTAs and has the resources to fully activate them…. But nobody engages with them because they can’t find them. Don’t hide your CTAs away in the footer of your website, look to have them as visible as possible and across all / most pages. They need to be front and centre for that split second when someone decides to act. If not, the visitor will just move on…

 

Don’t be too greedy

Of course you want to gather as much information as possible about the visitor as soon as possible. I get that. But don’t be too greedy… If your form has too many questions, people will simply not give it the time. Instead at this stage, make it really welcoming and easy for someone by seeking the minimum of information. So for example, if you are looking for someone to sign up for your newsletter, all you need from them is their email address and maybe their name. Moving beyond this will probably reduce your sign-up rates. As people move through the buyer cycle and take further actions, you can then seek more information from them at a later stage.

 

Give visitors comfort

One concern I always have when signing up for newsletters and giving out my personal data is how it is going to be used. Am I suddenly going to start receiving a barrage of emails instead of the weekly newsletter I was expecting? Or worse again, is my data now in the hands of other 3rd parties and I’m now receiving emails about goods or services in which I have absolutely no interest. All very GDPR unfriendly… but it happens.

Be very clear about how a person’s data will be used. Don’t leave them wondering if they’ll be spammed by you… and worse still by others. Their data is a very valuable possession that you are being entrusted with, so treat it with the respect that it deserves.

 

Calls to Action are a critical element of your website. Get them right, and your website can deliver a steady stream of engaged visitors, and hopefully enquiries in time.

How well are you following up your events

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Most of the financial planning businesses that we’re working with are busily reviewing their propositions as the country emerges from the shadow of covid lockdowns. For many firms this is simply a case of bringing forwards the benefits of remote meetings, identifying where they will fit in their offering going forwards and building remote meetings in as a core element of their proposition.

For other slightly more ambitious businesses, they have been running virtual client events over the last 15 months, mostly in the shape of regular webinars. These have been delivered by interesting and expert speakers, and by themselves too. Some of these businesses have seen their attendee numbers steadily increasing over the last few events, a real endorsement for their efforts. They rightly plan to continue delivering these webinars into the future.

These webinars have usually been excellent events, covering really interesting and valuable topics for their clients. However one area that can generally be improved is in the whole area of follow-ups – what happens after the event. Here are a few thoughts on maximising the impact of your webinar, to really ensure that it was worth all of the effort put into it.

 

Prepare in advance for afterwards

You know who your speakers are and you know the topics that they will be presenting. You may also have any presentation slides in advance.  So it’s relatively easy to have a few of the main follow-up assets fully or mostly prepared in advance. If these are left until after the event, they often get forgotten in the rush to get back to urgent client work. You can have the following prepared and ready to go,

  • A page or blog post on your website dedicated to the event. This should have a link to a recording of the event, that can be accessed via a completed form – this way you get to see who is downloading it and is interested in the topic. As part of this, encourage the user to sign up for your newsletter / other events so that you can then stay on their radar.
  • An email to attendees, thanking them for taking the time to attend and linking through to the event page on your website. Better still, prepare this in your newsletter software where you can track who opens and clicks on your email.
  • An email to people who couldn’t make it, advising them that there’s a recording available via the link to the event website page. As above, do this in your newsletter software.
  • If you happen to have any other relevant content on the topics covered on the webinar (whitepapers, blog articles, podcasts etc.), insert the links to these too.

When you prepare this in advance, you can be ready to go immediately after the webinar has finished and while it is still fresh in people’s minds.

 

Get active on social media

Then it’s time to get out and let the wider world know about the value you add to your clients. Publicise the success of your event on social media, leading people to the event page / blog on your website. Of course, once they are here, they may want to watch a recording of the event – to do so, they have to fill out your form, give you your email address and enable you to include them in your expert communications going forwards. Now you’re using your event to draw prospects to your business…

 

Review the analytics

After all of this, you’ll have pretty rich data. This will include,

  • How many people attended the event
  • Who they are
  • Who interacted with your emails
  • Who liked / commented on your social media posts
  • How many / who requested the recording
  • Some advisers have also sent out very brief post-event surveys, checking the pieces that people got most value from and seeking general feedback. This is more data to consider.

It’s one thing having all of this data, the important task is to use it. Block out an hour or two in your diary maybe a week after the event to go through the analytics. Was the event a success? What could be done better in the future? Most importantly, are their specific individuals who really engaged with the content and who might welcome a follow-up call?

 

Follow up

Where it makes sense, follow up with those individuals who were very interested in the topic. It’s quite possible that they are mulling over an issue in that space? Reach out with the offer of a remote follow-up conversation – this will enable each of you to see if there is something to explore a bit more, without investing much time in doing so. This might be where your event leads you into a wider planning conversation with a prospective client…

 

Next time you’re running a virtual event, invest a little time in post-event activity. It will be worth the effort.