This is contributing to what some see as a shortage of advisers and financial planners.

Researchers working for Investec Wealth & Investment quizzed 100 IFAs and financial planners across the UK during January 2024.

Almost half (49%) said they believe the shortage will increase or stay the same over the next five years. Four in 10 (42%) said the shortage is set to increase, with around 5% saying it will increase dramatically.

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Among those who think the shortage will get worse, the industry struggling to attract enough younger talent was pointed to as a reason by 74%. Growing regulatory burden was mentioned by 48%, and artificial intelligence making some functions redundant was also a common response (43%).

Investec’s researchers also spoke to 535 UK consumers with stockmarket-related investments.

One in five (19%) of these said they have struggled to find an IFA, financial planner or wealth manager to help manage their investments over the past 10 years.

The main reasons given for this were their investment portfolio not being big enough (41%), they did not think the ones they spoke to were very good (39%), the ones they spoke to were planning on leaving the industry or changing jobs (24%), and the IFAs or wealth managers were too busy and didn’t want to take on new clients (24%).

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Simon Taylor, head of strategic partnerships at Investec Wealth & Investment, said: “It’s concerning that the current shortage of IFAs and wealth managers in the sector could continue, particularly when the impact of this is already being seen through future potential clients being lost simply because advisers can’t take on new business.

“More must be done across the sector to make it an attractive career for new talent and at the same time, firms need to ensure they have the right technology, tools and services to enable their IFAs and financial planners to focus on the aspects of the profession that really matter – delivering value to their current clients and having the capacity to take on new ones.

“As more and more clients move into drawdown, the burden of work on those IFA’s left will only increase,” Taylor added. “Working with a DFM to alleviate some of this burden can significantly help to deliver the much-needed capacity to concentrate on the financial planning needs of clients.”

More than seven-in-10 investors prefer personal advisers when seeking wealth management advice, according to a recent study by Navigator Investment Services and EY.

“While the rate of digital adoption has been increasing, the desire for a greater human touch continues to grow in tandem. Our report validates the value of advisory services as a highly trusted source of advice that will not be easily replaced by self-directed, digital investment options,” said Akhil Doegar, chief executive at Navigator.

Among the 72% of investors who prefer to retain a human touch when it comes to advisory services, 35% responded that they favour adviser-led relationships, while 37% would look for a combination of both digital and physical services.

The appetite for purely digital-led relationships has also been declining at the higher end of the wealth pyramid, with only 6% of the surveyed ultra-high-net-worth investors preferring digital-led relationships.

“The preference for an adviser-led relationship in these segments can be attributed to their complex and bespoke wealth planning needs, stemming from larger sums managed, whether inherited or self-earned,” the report added.

Navigator noted that the results correlate with a 2022 CFA Institute study, which found that 66% of retail investors consider their primary financial adviser as their most trusted source for wealth management advice, while only 9% see online research and 7% see friends and family as their most trusted source for advice.

Navigator and EY launched the advisory report, entitled titled “Advancing the Art of Advisory: Is Advisory Still Relevant?”, which examines key trends in the global wealth management industry.

When selecting a wealth management provider, 34% of the surveyed investors said the top criteria is “trust that their advisers will act in their best interests”, followed by the ability to achieve high returns (21%) and their commitment to ethical conduct (15%).

The report also showed that investors are more likely to engage advisory services during major life events, such as starting a new business (61%), buying a home (60%) or inheriting money (59%).

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The company said that the software will automate some of the planning journey by using data and algorithms to suggest financial advice based on “probability of outcome”. It also said it will remove bias and subjectivity in financial advice.

Open Advice was created to help IFAs close the advice gap, engage better with existing clients as well as connect and build relationships with the next generation of customers.

First Wealth said the idea behind the platform was to create a solution that advisers can white label.

“The team were inspired to create this platform, which has been one year in the making, because, to date, they have been referring clients to competitor platforms because there’s been no cost effective way of dealing with them,” the firm said in a statement.

Open Advice is already plugged into P1 Investment Services to give clients access to low-cost portfolios and the First Wealth team is also working with Benchmark Capital to have data flow into the platform.

With the cost of living crisis and inflation at a 40-year high, it is likely people will have less disposable income and therefore less money to invest.

No matter your advice threshold, you will no doubt encounter many clients through your business who do not meet it. That is not to say, however, that they will not have the money to invest with you in the future.

At various points throughout your career, you are going to be faced with a decision – continue servicing a client who is unprofitable or send them elsewhere. That is where robo-advisers come in.

By partnering with a robo-adviser, you can build great relationships with clients. You can introduce a simple digital solution that meets clients’ needs today, through a fully managed and diversified portfolio.

Offering a service early in a clients’ asset accumulation journey builds a trusted relationship that you can re-visit as their needs and assets develop, while generating revenue for your business in the meantime.

During our time in the market, we have built some strong adviser relationships, but we know some still see us as competition.

On the contrary, we are not here to replace advisers where they are needed, and we are not trying to win customers who would be better off with an adviser.

Instead, we are here to serve people who are not yet ready for advice. When it is clear a customer needs advice, we recommend they speak to a financial adviser.

Whether it is to serve low value clients you have paid to acquire, clients’ family referrals or existing customers that now fall below your threshold, robo-advisers can be a great option to support the customer, nurture valuable relationships and grow your business efficiently.

This article was written for International Adviser by Izzy Neil, head of business development at Wealthify.

The subsidiaries have agreed to pay $187m (£155m, €179m) to the clients involved to settle the charges.

According to the US regulator, from March 2015 to November 2018, Schwab’s mandated disclosures for its robo-adviser product, Schwab Intelligent Portfolios, stated that the sum of cash in the robo-adviser portfolios was determined through a “disciplined portfolio construction methodology,” and that the robo-adviser would seek “optimal return[s]”.

But the SEC said that “in reality, Schwab’s own data showed that under most market conditions, the cash in the portfolios would cause clients to make less money even while taking on the same amount of risk”.

Schwab advertised the robo-adviser as having neither advisory nor hidden fees “but didn’t tell clients about the cash drag on their investment”, according to the SEC.

The watchdog added: “Schwab made money from the cash allocations in the robo-adviser portfolios by sweeping the cash to its affiliate bank, loaning it out and then keeping the difference between the interest it earned on the loans and what it paid in interest to the robo-adviser clients.”

Settlement

Without admitting or denying the SEC’s findings, Schwab’s investment adviser subsidiaries, Charles Schwab & Co, Charles Schwab Investment Advisory and Schwab Wealth Investment Advisory agreed to a cease-and-desist order.

They are required to pay approximately $52m in disgorgement and prejudgment interest and a $135m civil penalty.

The subsidiaries also agreed to retain an independent consultant to review their policies and procedures relating to their robo-adviser’s disclosures, advertising and marketing, and to ensure that they are effectively following those policies and procedures.

Gurbir Grewal, director of the SEC’s division of enforcement, said: “Schwab claimed that the amount of cash in its robo-adviser portfolios was decided by sophisticated economic algorithms meant to optimise its clients’ returns when, in reality, it was decided by how much money the company wanted to make.

“Schwab’s conduct was egregious and today’s action sends a clear message to advisers that they need to be transparent with clients about hidden fees and how such fees affect clients’ returns.”

Response

Charles Schwab said in a statement: “Schwab has resolved a matter with the SEC regarding certain historic disclosures and advertising related to Schwab Intelligent Portfolios between 2015-2018, and we are pleased to put this behind us. The SEC order acknowledges that Schwab addressed these matters years ago.

“In entering the settlement, Schwab neither admits nor denies the allegations in the SEC’s order. We believe resolving the matter in this way is in the best interests of our clients, company, and stockholders as it allows us to remain focused on helping our clients invest for the future.

“As always, we are committed to earning our clients’ trust every day and work diligently to maintain the highest standards for professional conduct throughout our organisation.”