Financial Planning Today: What do you see as the biggest threats facing the Financial Planning market?
Sarah Lord: The three top risks and therefore threats facing the profession are currently:
- Increasing regulatory costs – Firms could see their operational costs increasing due to compliance demands, increasing margin pressure and having to pass on costs to the client. Capital adequacy requirements could also lead to excesses increasing.
- The lack of professional indemnity insurance cover - The price of professional indemnity insurance, particularly in regard to pension transfer advice, has increased. Some firms have been unable to obtain the required insurance, restricting access to advice, particularly for defined benefit pension transfers. Increased excesses or the removal of retrospective cover could place significant financial risk on firms. This could see the cost of advice increasing and limiting consumer choice in some areas.
- Financial scandal - Trust in advice could reduce as a result of another scandal or crisis affecting the financial services sector. The risk of consumers being targeted for financial scams has increased significantly since the onset of the Coronavirus pandemic, which for some will impact on their view of the financial advisory market.
The live and current threat is the Covid-19 pandemic. As a profession we’ve had to pivot quickly to be able to continue to serve our clients. Many firms have seen a fall in revenues due to the perfect storm of lockdown impacting on the ability to write new business and a decrease in recurring revenues due to the volatility in the investment markets.
What would you do to solve the problem of rising levy fees?
The current method of funding consumer compensation is unsustainable. The Personal Finance Society is calling for government intervention and a complete overhaul before there is no alternative, as both consumer protection and market sustainability continues to be negatively impacted.
We must remove the volatility and uncertainty around the availability of professional indemnity insurance, the consequential impact and pressure on the Financial Services Compensation Scheme and its levy.
The Personal Finance Society is engaging with the government to explain how this can be achieved by pooling the cost of compensation at the highest level: funds under management.
This would mean a much wider, fairer, and sustainable solution for modernising the regulatory, consumer education and compensation funding structure to ensure consumers don’t lose out on access to advice, are compensated when things unexpectantly go wrong and ultimately have greater trust in our regulated sectors at a time when the public are facing uncertainty and a significant and growing risk from scams.
You have just taken over as President of the Personal Finance Society, what are your main goals for the year?
I have chosen “Building a strong and sustainable profession” as the theme for my Presidential year, which I believe is predicated on three core themes:
- Promotion of the profession to the next generation of advisers and how apprenticeships through the Aspire programme can help develop the next generation of advisers.
- Sustainability of our client relationships – We need to share more good practice across the profession as to how to transition client relationships from adviser to adviser, particularly when a client has worked with an adviser for many years and is handing over the reins to the next generation of adviser.
- Resilient business models that adapt to the changing needs of our clients – The pandemic has demonstrated the need for a resilient business model but it goes deeper than this. We need to continue to focus on how we adapt and develop business models to provide services that meet the needs of clients of the future whilst delivering value for money, which means embracing technology and developing the right mix between technology and human interaction.
What do you think makes Financial Planners special?
Financial Planning is such a wonderful profession as we get to help clients live the life that they desire by helping build a financial plan to support their life’s journey.
Money is such a personal thing. How you think and feel about money is personal to you so as Financial Planners and advisers we are in a wonderfully privileged position of working alongside clients to be their confidant when it comes to money, which I believe is very special.
Clients want to work with Financial Planners that they trust and be there to support and guide them over many years. As Financial Planners we have to have wonderful communication and inter-personal skills to build these relationships. Furthermore, clients look to us make the complex simple.
The two main qualities that make a good Financial Planner in my view are:
Empathy – Many clients are concerned for their own financial wellbeing. We have the fabulous role of giving them confidence in their financial future but to be great at that empathy is required in abundance.
Being non-judgemental – This is one of the biggest things I learnt from completing the George Kinder Registered Life Planner training. To be a great Financial Planner we have to leave judgment at the door. We can’t let our own personal biases interfere with helping our clients achieve what is important to them.
What do you see as the biggest opportunities for Financial Planners at the moment?
The Coronavirus pandemic has shone a light on individuals’ financial resilience and has demonstrated how Financial Planning and advice can help support with building this.
The biggest opportunity is to provide clients with confidence in their financial wellbeing, working with clients to deliver truly bespoke financial plans that empower them to make their life choices.
There will always be opportunity for Financial Planners as the unadvised market is significant. Businesses need to focus on how they continue to develop and evolve their client experience and proposition to deliver what clients in this day and age want. We must deliver value for money and make sure we evolve digital capabilities to enhance the client experience over the medium and long term, not just for the short-term impact of Covid-19
What have been the biggest highlights of your career so far?
Having the confidence to set up my own company so early into my career and at the height of the credit crisis. It was a bold and brave move at the time, but I am so glad I did. I learnt loads about myself.
Working in Dubai - I really enjoyed my time working in the Middle East. Working in the offshore financial advisory market is completely different to the UK market. I loved the opportunity to lead the way with a transparently charged true Financial Planning service.
Being elected President of The Personal Finance Society.
What would your advice be to someone looking to start a career in Financial Planning?
It is a fantastic career. It is so rewarding to work alongside clients to help them achieve their financial and lifestyle aspirations. Seeing clients achieve lifelong goals because of the advice you provide them is hugely rewarding.
I have always taken the view, “knowledge is power” and therefore always looked to develop my technical knowledge through the qualification framework. There aren’t many exams and qualifications that I have not done. Keep on learning and build your knowledge through exams but it is not just about the technical knowledge as exams only get you so far. You need to build your own style as to how you translate that knowledge into your client conversations. Final piece of advice would be as an adviser focus relentless on delivering the best client experience you can and become your clients trusted adviser.
What have been the biggest changes to the Financial Planning market during your career?
The landscape is always changing but the biggest in my career so far has to be the Retail Distribution Review. The removal of commission and the drive for greater transparency of the cost of financial advice has been a good thing in my mind.
However, it has led to widening of the advice gap, which as a profession we need to collectively address.
Tell us one thing about you that not many people know
I have done plenty of crazy and fun things for charity – I have abseiled down the inside of the Minster building in London, cycled from Ho Chi Min City to Siem Reap in 5 days, undertaken a firewalk and done a solo sky dive all for various charities.
The one thing that I am yet to tick off the list is to carry out a wing walk – many think I am a little crazy to want to do this but it is something I would love to challenge myself to do to raise money for charity.
Sarah Lord Biography: Sarah Lord is the President of the Personal Finance Society and chief client officer at Succession Wealth. Prior to joining Succession, she was a partner at professional services firm Mazars. She was also a partner at Killik & Co, heading up the wealth planning operation in the UK and the Middle East. She is a fellow of the PFS as well as holding Chartered Financial Planner and Chartered Wealth Manager status. She is also a Certified Financial Planner.