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Is tech a double-edged sword for advisers?
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Collaboration in a digital world
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Benefits and challenges of cash management tools in a changing financial landscape
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BoE base rate moves: What do they mean for cash?
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Technology and your practice
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Client relationships
Managing relationships is at the core of any financial advisory business and there are few more important ones than those that advisers develop with their clients. Strong relationships can improve client loyalty, increase lifetime value, and importantly, boost referrals. As more advisers incorporate technology into their practices, are they at risk of alienating clients? Or can technology help them gain a competitive edge in an increasingly noisy world?
article 01
When markets are uncertain, technology becomes even more important and when the world is uncertain, the human touch becomes more important
While technology has its merits during volatile market and economic conditions, the personal touch should not be understated because tech, roboadvisers, and artificial intelligence cannot provide the emotional value that advisers do. Simply put, technology can’t factor in emotions and it can’t empathise with clients, yet. “It should be a combination of both. Relationships are going to be personal touch with a certain demographic, but the new clients are very used to virtual meetings and having access to apps to view what their investments are doing,” says Dominic. But even as client comfort increases with technology such as video conferencing, advisers should still be proactive so that they stay on top of clients plans, upcoming milestones, and even how social or climate change issues may be changing how their view their investments. In these instances, it is the critical human touch that initiates these conversations and has the potential to make a difference in their lives.
Where technology can really give advisers an edge against the competition is the opportunity to connect with and to capture a younger generation of clients. Younger generations expect seamless adviser experience and they want to be able to access their investments online and on demand. Dominic says that while the increased use of technology will help to engage with younger clients more, it will also be beneficial to clients with less funds under management. “The regulatory bodies have made it more difficult for advice firms to look after these type of clients because of cost constraints,” says Dominic. “However by encompassing technology to develop solutions will allow these clients to still benefit from an advice structure that would have not been available to them,” he says.
Targeting a younger generation
As financial advisers navigate the increasingly complex regulatory landscape, technology offers a potential solution to streamline administrative tasks and enhance client engagement; but can excessive reliance on technology erode the personal touch that is essential for building strong client relationships?
The financial advice market is currently grappling with several challenges. Rising regulatory obligations, such as Consumer Duty forces advisers to dedicate significant time and effort to administrative and reporting tasks to show regulators that they are delivering good outcomes for clients. This burdensome activity often leaves advisers with less time to strengthen existing client relationships and build new ones; processes that can both take time and multiple communication touch points. “Meeting with clients and developing their strategies are the enjoyable parts of the job. The challenging, but important parts are the red tape that follows. Dealing with administrative tasks is time consuming and expensive. If we can streamline that process with technology, it is only going to benefit us and the client,” says Dominic Quibell, Chartered Financial Planner at Lifetime Wealth Management. Smaller firms can be particularly vulnerable to the demands of Consumer Duty and it can be difficult for them to employ the same technological advances as bigger businesses due to prohibitive costs for small players. While technology can help advisers as an essential time-saving tool to increase efficiency and improve client engagement; one study showed that it may also translate to more pressure on advisers and their clients. According to research from wealth manager Investec Wealth & Investment (UK), a study with financial advisers and financial planners across the UK found that 81% of advisers said clients are more demanding because they want to make more use of technology and to have greater insight into their investments. In a few short years, investors have faced post-Covid equity market volatility and economic uncertainty, which has included inflation figures not seen for a generation, a cost-of-living crisis that has squeezed nearly everyone, and major elections across the globe. It is no surprise that clients want the best possible service and advice when it comes to their money. However, with this backdrop, there is a duality that advisers need to consider. When markets are uncertain, technology becomes even more important and when the world is uncertain, the human touch becomes more important. “For us, technology is very important when markets are performing poorly. We have useful tools for things like cash flow modelling and doing reviews for clients, rather than purely focusing on fund performance last year compared to this year,” says Dominic.
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The value of the human touch
“The increased use of technology will help to engage with younger clients more, it will also be beneficial to clients with less funds under management”
“Dealing with administrative tasks is time consuming and expensive. If we can streamline that process with technology, it is only going to benefit us and the client”
Dominic Quibell, Chartered Financial Planner at Lifetime Wealth Management
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article 02
We can easily share screens, calendars, and information with clients or other advisers, We wouldn't be able to do this without modern technology
Increased use of technology also brings additional challenges. Shardlow points out that, while digital tools can make processes smoother, “compliance and regulatory issues are always an additional hurdle”. Whilst a recent study from Accenture revealed that clients are becoming more comfortable with sharing data if it means they will get a more personalised service, understandably, they also expect secure messaging and document sharing. Shardlow notes that, to protect client data and ensure compliance with regulations, advisers must maintain robust data management practices and stay informed about evolving regulatory requirements. Advisers will also need to find a balance between utilising digital tools for collaboration and managing the risks associated with data breaches or regulatory non-compliance.
Technology is constantly evolving and presenting new opportunities to streamline the way advisers work. Ultimately, those who embrace digital tools, services, and platforms will ultimately find themselves better placed to provide the most personalised service and remain competitive in the digital age.
Technology’s role in the future
In the digital age, clients expect a seamless service, with research suggesting that more than half of investors want improvements to digital services offered by their wealth manager or adviser. Their needs are also becoming more complex and often require the services of a range of professionals. As such, collaboration between financial advisers, accountants, solicitors, and other professionals could offer significant advantages – for both clients and advisers.
According to Ed Shardlow, financial planner and adviser at Ablestoke Financial Planning, collaboration across professional services can improve the overall client experience. “If your client is getting good professional advice in other areas, then that's good for the relationship as a whole,” he says. Advisers also benefit from such relationships as they can result in additional revenue streams through fee-sharing and, more importantly, lead to valuable referrals. “If you're sharing your clients with other professionals, they can share clients with you. It gives you more points of contact and a wider reach,” Shardlow adds.
The challenges of increased digitisation
The benefits of collaboration
New technology has opened up numerous opportunities for increased collaboration. “We can easily share screens, calendars, and information with clients or other advisers,” says Shardlow. “We wouldn't be able to do this without modern technology.” However, it’s important to note that these technological advances have also changed clients’ expectations. They now expect faster and more seamless communication. As such, advisers need to be ready to embrace digital tools and services to meet evolving client expectations.
Adapting to changing expectations
Digital platforms, for example, can play a significant role in improving the client experience. James Lindley of Castell Wealth Management remarks on using cash platform Flagstone: “Our clients can open and manage various accounts in one place, saving time and hassle. The platform allows for total flexibility.” This ease of use is becoming critical as clients expect faster, more personalised services.
Claire Jones, Head of Strategic Relationships and New Business at Flagstone, comments: "Platforms like Flagstone give advisers a powerful tool for delivering exceptional service. By simplifying complex cash management and offering a flexible solution, we help advisers dedicate more time to what matters most – their clients."
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There will be, of course, some challenges to encouraging clients to adopt or utilise the full range of cash management tools necessary. They may be resistant to change or differing ways of charging - implementing new technologies often requires upfront investment and your clients. “I'd say about 95% of my clients are reasonably happy using technology to do the reviews; you have the odd older client who still prefers face-to-face or more personal touch. Technology has improved efficiency without a shadow of doubt,” says Dominic Quibell, Chartered Financial Planner at Lifetime Wealth Management. Furthermore, there are some AI and cybersecurity concerns to consider. Some investors may feel uneasy about AI involvement in their cash funds, given the negative press on the ethical considerations recently. And as more of us rely on technology to look after our finances, we need to ensure client data is fully protected – this is absolutely crucial in preventing fraud. As with every evolution in the financial management space, there will be an element of client education needed around cash management tools. Clients’ needs may need clear explanations and ongoing support to fully understand and support new technologies, and this may come with additional initial costs for your business. Cash management tools can offer a highly efficient and enhanced client service for advisers navigating the digital world and evolving regulations. But those who can master the art of seamlessly blending technology's power with the human touch, can create sustainable success for themselves and their clients.
There are several benefits to using the above tools, with the most obvious being time-saving and efficiency. The automation of such tools frees up advisers’ time from admin to work on higher- value activities and client conversations. Within the latter, the cash management tools will allow advisers to provide a snapshot of their portfolios, increasing transparency and building on engagement and trust. “In our world there are still plenty of providers who employ physical paperwork, wet signatures and that kind of thing, which are simply more inconvenient for people. We prefer utilising solutions that are easy to use and with a good user interface,” says Ed Shardlow, financial planner and adviser at Ablestoke Financial Planning.
Benefits
High interest rates have brought cash savings into sharp focus. Combining this with clients now expecting round the clock access and control over their finances, and particularly the new generation of investors that are fully embracing a digital world, has resulted in the appetite for cash management tools has surged.
Challenges
We have seen the adoption of digital platforms, mobile apps and the expertise of dynamic FinTech companies prove popular. Cash management tools are fast becoming essential for advisers to thrive. Many do recognise this and, according to FE fundinfo’s 2022 adviser survey, 69% of advisers spent more on tech, and 38% invested in tech and software solutions for the first time in the previous 12 months.
There are five cash management tools we have identified as being commonly used:
The automation tools can also offer the reduced chance of human error and improved regulatory compliance, while the reports and data provide valuable insights for informed decision-making. Importantly, cash management tools also play a part in closing the advice gap, as technology can help more people access expert financial advice and maximise their interest income.
Flagstone’s cash deposit platform offers you and your clients 24/7 access to hundreds of bank accounts, including market-leading and exclusive interest rates, from a single Flagstone account. Your clients can manage their money, and deposit, transfer or withdraw cash at any time. As an adviser, you get complete visibility of your clients’ cash portfolio, so you can monitor their investments in real time and provide personalised advice. Regular alerts highlight maturing accounts or new products for those (re)investment conversations.
Cash deposit platform: A one-stop (online) shop for managing cash bringing a wide range of savings accounts from different banks and building societies together in one place. Cash flow forecasting and budgeting: Enabling advisers to analyse data from bank accounts, bills and other income sources and therefore provide real-time cash flow analysis and savings goals tracking. Open banking: Financial software that provides advisers with a complete view of clients’ bank accounts. Predictive analytics and scenario planning: AI models that can predict future cash needs and market fluctuations, allowing advisers to manage potential shortfalls and emergencies, as well as suggest investment and saving opportunities. RegTech: Technology tools that help advisers stay informed and compliant with the latest financial regulation and data security.
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Of course, future rate cuts are not guaranteed, but by adopting a strategy that combines longer-term savings products with short-term flexibility, savers can protect themselves against future rate volatility while maximising the returns on their cash. "In a market where rates are softening, it pays to do your homework and diversify your savings. Savers who maintain multiple savings accounts with portions of their cash maturing regularly stand to benefit the most,” comments Simon Merchant, co-founder and CEO of Flagstone.
With experts predict that rates could be cut again, savings professionals are advising clients to be proactive. Flagstone’s research reveals that, despite the current uncertainty, there are favourable rates out there and cash investors able to navigate the various products on the market could find themselves in the ‘sweet spot’, with
Savers need to act fast
The Bank of England's rate cut in August 2024 appeared to signal a shift in monetary policy, but the recent decision to hold the base rate at 5% in September has added a degree of uncertainty.
Balancing flexibility and returns in uncertain times
“Saving is a high-performing asset class that anyone can access. The more good savings habits people adopt, the harder they can make their spare cash work for them”
Simon Merchant, co-founder and CEO of Flagstone
While falling interest rates typically lead savers to reassess their cash holdings, inflation remains a persistent concern – with Bank Governor Andrew Bailey stating that more evidence of inflation being tamed is needed before cutting rates further. However, with two more rate decisions due by the end of the year, research from Flagstone has previously found that seven in ten (69%) of savings professionals predict the base rate will end 2024 at 4.5%. So, what does this all mean for cash?
inflation at 2.2% and interest rates for savings accounts still offering rates of up to 5%. In fact, Flagstone research found that 60% of savings professionals recommend securing longer-term rates now, ahead of further potential rate cuts.
“These savers recognise the value of diversifying by term length, ensuring reliable liquidity, strong returns, and the ability to take advantage of the relentless competition among banks to top the best-buy tables.” Merchant’s view is reflected in Flagstone’s findings – with a third of respondents suggesting diversifying savings across different term lengths to maintain flexibility and optimise returns. Another third (33%) recommended spreading cash across accounts with varying term lengths to maintain flexibility while taking advantage of the best offers available.
Flagstone’s research highlights the importance of acting now. For savers who can lock in rates for 12 months or longer, there is still potential to secure solid returns that exceed inflation. What’s more, by adopting a strategy that combines longer-term savings products with short-term flexibility, savers can protect themselves against future rate volatility. The decision to hold rates at 5% is just the latest chapter in the Bank of England's approach to managing inflation. With rates potentially falling in the coming months, the challenge for cash investors is to navigate these changes, along with the different products available. Once again, proactivity is key. As Merchant notes, "Saving is a high-performing asset class that anyone can access. The more good savings habits people adopt, the harder they can make their spare cash work for them."
Opportunities ahead for cash investors
article 05
The various wealth gaps between gender have been discussed at length in recent years – investments, pay, pensions – and women are worse off in every sense.
Statistics on women and pensions are bleak and little has changed over the past decade. Change will require some huge societal shifts around family responsibilities and caregiving to see these move dramatically, but there are plenty of ways the advice industry can help women on their financial journeys and alleviate some of the disadvantages of those gaps.
Another common expectation around women and financial advice is that they tend to be more risk averse than men. IFA Wright said this has been the case in her experience: “I have had to educate the client as I had someone in their 20s getting paid quite handsomely. I had to explain they can afford to take risk.” However, the concept of women being more risk averse is essentially “a fallacy”, according to Olivia Bowen, partner and financial adviser at Castlefield, and comes back to the wealth gaps. “There has been research to show that women will tend be more cautious, but the only reason for that is because they're in a more financially unstable situation in the first place. It shouldn't be gendered. Anybody who's not feeling that wealthy is going to be more cautious,” she says. Also challenging the ‘women are more risk-averse’ concept, Tait says in her experience women tend to follow the exact same risk strategy as their partners. “We try to address this by holding joint meetings, so they are both involved in the decision-making, however if they are advised separately the overall approach to risk assessment is consistent for both men and women.”
Are women more risk averse?
First, let’s take a closer look at the biggest causes of the wealth gaps. Put simply, Anita Wright, independent financial adviser (IFA) at Bolton James, says: “Women have career interruptions to take time off for children – men don’t.” Not only this, women are more likely to take time off care for relatives or offer other family support, and this time out of the workforce can pause a woman’s career path and can have repercussions further down the line, not just when they return to work.
Pauses in career and impact on earning power
“These pauses can lead to a knock-on effect for future earnings, and this in turn impacts the amount of money available to fund a pension, not to mention the loss of pension contributions and years of State Pension entitlement during their career break”, adds Fiona Tait, technical and compliance director at Intelligent Pensions. “Women who take an extended break don’t just lose out on their earnings during their time off but often find it difficult to regain their previous earning power, either because they cannot work full time or because they have been unable to keep up with changes in the workplace. Those who do work part time are rarely given senior roles and of course will earn less due to their reduced hours.”
Further amplifiers of the wealth gaps are the lack of education and awareness women tend to have when it comes to financial advice. “Some of it is down to financial education, and some of it comes from what they've been brought up with,” says Katie Campbell, financial adviser at Autonomy Finance, part of the St. James’s Place network. “The more finances are talked about in a family, the better educated the male or female is. Sometimes we come across 20-year-olds making very good financial decisions. They have been told that they need to do a pension, they don't really understand why, but they know it's important. “On one hand you have women who are very financially educated, and it's a case of filling in the gaps to make sure they're on plan. Then we have those come later in their journey, and we need to close the gap quicker. Some of the most common feedback I receive is: ‘I wish I'd known this aged 18-20, I wish I'd done more.”
Education – start young
Some of the most common feedback I receive is: ‘I wish I'd known this aged 18-20, I wish I'd done more’
Coming back to our opening points around the wealth gaps, there are some actions that women, their partners and their advisers can encourage to help narrow these down. “Splitting family responsibilities equally with a partner can reduce the burden falling on the woman alone. However, this may not always be viable if the man is the main breadwinner and therefore a compensatory arrangement could be negotiated whereby the family income funds pension contributions and voluntary National Insurance Contribution whilst the mother raises the family,” Brett explains.
Narrowing the wealth gaps
86
Women earn 86 pence for every pound earned by men
Median pay gap (2023)
40%
Only 40% of women are investors (compared to 60% of men)
Average pensions savings at retirement
£69,000
£205,000
Sources 1. www.ciphr.com 2. www.rbs.co.uk 3 www.nowpensions.com
Many women end up taking the lump sum calculated by using the Duxbury formula, rather than getting expert help to analyse the figures to see if the offer is actually enough to provide what they need in the future. The calculations used to create divorce settlements are a good starting point, but both parties should be encouraged to engage with financial planners early on to ensure they are getting the best advice on how to proceed.
Get professional financial advice
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Divorce can have a significant impact your credit score and financial stability. This doesn’t happen directly as credit reports state whether you are married, single or divorced, but it does have an indirect impact, because how you handle any joint accounts with a former spouse can influence both of you. Close any joint accounts to prevent any debts being built up against your profile, and open new accounts in your name to build your individual credit history.
Protect your credit and financial independence
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The little-known Duxbury formula, created back in 1992, is used to determine the lump sum payment needed for spousal support by considering factors like support duration, investment returns and inflation, and despite it being 30 years old – and arguably well out of date – it is still commonly used in divorce settlements. It assumes unrealistic fixed investment returns and a certain risk tolerance - which many women in stressful divorces may not have - and often inaccurately estimates life expectancy. Many women end up accepting the Duxbury amount without first checking its fairness and this is leading to unfair outcomes for people across the UK.
Don’t rely on Duxbury
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Having a full understanding of your financial situation is crucial for making informed decisions during any settlement negotiations. Create a comprehensive budget that reflects not only your current situation, but also anticipates any future changes like: children going off to university; or potential shifts in income; or expenses that could happen as you get older.
Understand your financial situation
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Make sure you have a detailed understanding of all marital assets; this includes your home (and any other properties), any vehicles, bank accounts, etc but pensions are frequently overlooked in divorce settlements. Make sure this is something that is included in your settlement negotiations.
Ensure all assets are included
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by Megan Jenkins, chartered financial planner at Saltus
Start contributing to a pension as early as possible. Earnings power may never be the same again after a career break, and it is these contributions that will be invested for the longest and should make the most money. Do not opt-out of you are automatically enrolled unless the contributions are genuinely unaffordable. Opting out means losing employer as well as personal contributions.
by Fiona Tait, technical and compliance director at Intelligent Pensions
17%
of women feel very confident about achieving their long-term financial goals, compared to 29% of men
26%
of women have a stocks and shares ISA, compared to 45% of men
Source: 4. www.spw.com
Katie Campbell,
Five financial planning tips for women navigating a divorce
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Step-by-step advice for women planning for retirement
If there is a divorce, get your share of the pension. Where there is a recognised family unit, any pensions do not just belong to the wage-earner. Family law makes it clear that unless there is a reason to show otherwise, matrimonial assets belong to both parties, and the role of the ‘home-maker’ should be equally recognised to that of the breadwinner. If there is significant earnings gap consider life assurance, especially where children are involved.
While taking a career break, Campbell says, women should try to continue to pay into a previous workplace pension if they are able to do so. “Anything is better than nothing,” she adds. Ultimately, it is no individual’s responsibility to close the wealth gap, but every woman has a responsibility to themselves to ensure they are prepared for retirement. If they do this early on, educate themselves and build up a trusting relationship with an adviser, they are sure to be in much better shape.
financial adviser, Autonomy Finance
article 06
Inter-generational planning ensures continuity in wealth management, minimises tax burdens, and helps maintain family wealth and legacy over time – all of this will help build trust and open communication between families and advisers. Part of these conversations will be with children early on to discover what their circumstances and priorities are, while also being mindful of the original client, typically the parents or grandparents. “That is the priority,” comments Olivia Bowen, partner and financial adviser at Castlefield. “We currently do cashflow forecasting up to age 100 but I am wondering whether we need to increase this to 104 or so. There are so many things to consider – say you need to go into a care home aged 85, your expenditure bumps up and how does that affect your capital?
There are many hurdles to negotiate, including tax and estate planning, and firstly financial advisers need to consider how they need to think differently about their approach and planning for clients. “The industry is traditionally geared to appeal to individuals with acquired wealth,” remarks Fiona Tait, technical and compliance director at Intelligent Pensions. “The increase in wealth held by the baby boomer generation means that advisers have not had to look too far to find clients who would benefit from their services. As this cohort ages, this wealth is starting to pass to the next generation. Advisers are looking to adapt their services so that they can engage with them now rather than waiting until after the wealth is transferred. “Building a relationship ahead of their inheritance means that their parents can be involved and endorse their adviser’s services which lessens the risk that another adviser will step in as soon as receive their legacy.” Speaking to the wider family is crucial to gain an understanding of where each generation wants to be. “If we can educate everyone going down the family tree, they should then keep hold of that family loom,” adds Katie Campbell, financial adviser at Autonomy Finance, part of the St. James’s Place network.
Trillions being passed on
Financial advisers are facing significant conundrums in their planning for clients amid the generational wealth transfer that is coming over the next few decades.
Generational differences in priorities
On the one hand, baby boomers with ‘golden-age’ pensions that are living longer than ever before. On the other, the rising young investor keen to make a quick buck, seeking advice from YouTubers and TikTok influencers. This is, of course, generalising, but is on the minds of financial advisers as they think about the multi-generational planning that is needed for their clients and their families in the near future.
This helps them decide how much they can give away and support the next generation. We can’t predict the future but cashflow forecasting is very important.” For some, adds Anita Wright, independent financial adviser (IFA) at Bolton James, the priority is to pay off chunks of children’s mortgages, so they are not paying interest for years and years.
So, how can advisers adapt? What do they need to consider? EQ Investors’ financial planner Zohaib Mir points to how the younger generations prioritise financial independence – and one way this is expressed is through the desire to control finances through smart devices. “Advisers can adapt by offering tailored advice on investments, using digital platforms for ease of access, and fostering greater transparency in their services.” Wright adds: “Encourage clients to use online platforms or download apps, and then get their children to do so too. Everyone has online banking, encourage them to do the same with their investments.” Other firms are looking at artificial intelligence (AI) for further support. Tait says: “We are keen to introduce measures that will improve efficiency. Financial advice, particularly retirement planning, can be complex and often involves a considerable amount of data transfers and analysis. Automation is the obvious way to deal with this, however it is essential that any new technology can work alongside existing systems without creating more work.
Tech solutions
62%
have never switched financial adviser
74%
of those aged 55 or over, have never switched financial adviser
£5.5tn
in assets will be passed down from generations between 2022 and 2050
Number of inherited estates worth more than £1m increased by over a third, from 8,340 in 2013/14 to 11,210 in 2018/19
1/3
of global advisers say that they have lost significant assets through generational attrition
2035
Wealth transfer to peak
Source 1. www.theprivateoffice
Source: Vanguard analysis based on ONS 2020 Wealth and Assets Survey; 2020 national and subnational mid-year population estimates for the UK. As published in the FT.
Silent generation (born between 1928-45): £1.5tn wealth accumulated Baby boomers (born 1946-64): £5.1tn wealth accumulated Generation X (born 1965-80): £2.3tn wealth accumulated Millennials (born 1981-200): £700bn wealth accumulated Generation Z (born 2001-20): £51.5bn wealth accumulated
Total wealth by generation
(born between 1928-45)
Total wealth accumulated by generation
Silent generation
£1.5tn
wealth accumulated
(born between 1946-64)
Baby boomers
£5.1tn
(born between 1965-80)
Generation X
£2.3tn
(born between 1981-2000)
Millennials
£700bn
(born between 2001-20)
Generation Z
£51.5bn
Source: SJP
Lisa Conway-Hughes, chartered financial adviser at LCH Wealth answers our questions on retirement planning and engaging clients.
article 07
This will help you stay on track towards your retirement goal and ensure that you are making the most of tax-efficient options. As your circumstances change, for example a change in income or retirement goals, it's necessary to adapt your plan. Using a cash deposit platform can help you keep on top of your cash savings and change tack quickly if needed.
Review and adjust your strategy regularly
It’s smart to think about the tax implications of your investments. There are tax-efficient savings options available in the UK, including Individual Savings Accounts (ISAs) and Self-Invested Personal Pensions (SIPPs). They can offer tax benefits and help you increase your savings.
Consider the tax implications
By diversifying your investments, you can minimise your exposure to risk and potentially improve your returns. This means investing in a variety of different asset types such as stocks, cash, and property – so if one asset takes a loss, it shouldn’t affect the others.
Diversify your investments
Keeping some of your retirement money in a savings account can provide peace of mind and easy access to your money. Advisers recommend holding 3-6 months’ worth of cash before investing in other riskier assets. You can also choose a mix of multiple savings accounts with different terms to maximise returns while having an emergency stash to fall back on.
Keep money in a savings account
Starting to save as early as possible is one of the most important things you can do to secure a comfortable retirement. With the potential to enjoy compound interest, the earlier you begin, the better off you’ll be.
Start early (or today)
Retirement checklist
This really depends on the individual. The money needs to be suitable to their attitude to risk/ethical/sustainability views. They need to have sufficient short-term reserves and emergency cash buffer to allow us to take risk for the medium and long term. I mainly use the “bucketing” approach for clients.
Once your client retires, how should their money be invested? What do they need to consider?
How do you approach women’s and men’s retirement? Are there a lot of differences?
There aren’t female/male differences other than statistically women tend to live longer so this will need to be taken into account. The main thing is doing our best to educate clients so that they are making informed choices around retirement.
What tax implications do clients need to consider as they approach retirement?
They need to consider the tax implications of all the assets they are going to rely on for income. Often, we accumulate income taxable assets; for example, pensions, and state pension rental income, and so supplementing this with Capital Gains Tax assets or tax-free investments (ISAs) can help clients to be more tax efficient in retirement. Finally, if they are married it is about making sure that assets have been accumulated (ideally) equally or as equally as possible. For example, are they both using their personal allowance and are they in the same tax bracket? Rather than one person being a high-rate taxpayer in retirement and the other a 0%.
The choice is taken away from clients until 55 /57 depending on their age now. Most of the time the biggest challenge I face is helping clients to feel comfortable with spending enough. I can only think of one client that overspends in retirement and has had to be reined in. My job in this relationship is to communicate as clearly as possible the implications of overspending – especially in the early years of retirement.
They need to have sufficient short-term reserves and emergency cash buffer to allow us to take risk for the medium and long term
Clients can be tempted to dip in pension pots. How do you handle this?
On average it is driven by me, but clients are confused by the options open to them when they first get in touch to get help.
When do clients start to ask questions about their retirement options? Or does this tend to be driven by you as the adviser?
When clients ask about their monthly retirement income, what do you need to consider?
Inflation, what is affordable over the long term, have care provisions been taken into account, how income needs will fluctuate through retirement, the tax of the income that you are taking and if you can be more tax efficient.
How do you advise clients on how much they should be saving towards retirement?
We do in-depth cash flow models and look at all the variables e.g. age at retirement, life expectancy, expected return and inflation. The need to save for retirement then needs to be overlayed their other goals e.g. house and mortgage repayment, financial planning and for children.
article 08
In a significant development for savers and investors, Reeves announced an increase in Capital Gains Tax (CGT). This tax applies to the profits made from selling assets like a second home or investments, including stocks. Starting in April 2025, the rates on Capital Gains Tax will rise with:
Chancellor Rachel Reeves has delivered her first Autumn Budget to Parliament. From changes to Capital Gains Tax to State Pension rises, we take a closer look at some of the key announcements.
Changes to Capital Gains Tax
On a historic day for Britain, the first female Chancellor Rachel Reeves presented Labour’s Autumn Budget, outlining the government’s ‘growth-focused’ plan for the UK. Reeves detailed a fiscal plan that includes tax increases and spending strategies aimed at tackling what she described as a £22bn ‘black hole’ in the nation’s finances.
For those with investment portfolios or second homes, these changes could lead to higher tax bills when selling for a profit. Commenting on this change, CEO & Co-Founder of Flagstone, Simon Merchant, says: “Investors must now choose which investments to keep and which to divest to minimise the impact of higher CGT liability further down the line. More than a third (34%) of Flagstone savers expect to invest less now or in the future as a result of the CGT change*. Investors exiting investments would be wise to consider the competitive risk-adjusted returns they can enjoy from savings.” With Capital Gains Tax increasing, many investors face an important decision: sell assets now to lock in current rates or wait and risk higher taxes. But selling now could leave you with substantial cash and no clear plan for next steps. This is where Flagstone’s cash deposit platform can help. Instead of letting your cash sit idle in low-interest accounts, manage and grow your funds securely with access to over 60 banks – all in one place. Maximise your money while navigating the market and waiting for the opportune time to reinvest.
The Chancellor has announced stricter rules on Inheritance Tax in a bid to raise more than £2bn. She said: “First, the previous government froze Inheritance Tax thresholds until 2028. I will extend that freeze for a further two years until 2030. That means the first £325,000 of any estate can be inherited tax free, rising to £500,000 if the estate includes a residence passed to direct descendants. And £1m when a tax-free allowance is passed to a surviving spouse or civil partner.
Stricter rules on Inheritance Tax
The government’s key economic goals are to stabilise the economy and encourage long-term growth. Inflation, measured by the Consumer Price Index (CPI), is projected to average 2.5% for 2024, and gradually ease to 2.0% by 2029. In terms of economic growth, the Office for Budget Responsibility forecasts a 2.0% increase in real GDP for 2025, with consistent yet modest growth in the subsequent years. Reeves believes these measures will boost the UK’s economic potential and improve its financial outlook. Here’s a breakdown of the key updates from the announcement and how they might impact your personal finances.
Inflation outlook and economic growth
“Investors exiting investments would be wise to consider the competitive risk-adjusted returns they can enjoy from savings”
Simon Merchant, CEO & Co-Founder of Flagstone
State Pension rise
In a bid to support retirees, the Chancellor confirmed that the state pension will increase by £470 per person in 2025-26, aligned with the triple-lock system. Reeves reaffirmed Labour’s commitment to protecting pensioners’ financial security, even as the government takes steps to close fiscal gaps.
With Capital Gains Tax increasing, many investors face an important decision: sell assets now to lock in current rates or wait and risk higher taxes
Non-domicile status abolished
Reeves announced another big change: the non-domicile tax status will be removed. The status allows some people living in the UK, but whose permanent home is in another country, to not pay UK tax on money they earn from abroad. Starting in April 2025, this will change. The government will introduce a new tax system based on residency, meaning that everyone living in the UK will have to pay taxes on their worldwide income. This change is expected to bring in an extra £12.7bn over five years.
VAT on private school fees
Starting on 1 January 2025, private schools in the UK will be subject to 20% VAT on all education, training, and boarding services. Reeves stated that this move aims to ensure every child has access to a high-quality education and will generate funds to invest in state education – thereby improving standards and opportunities for all students. Alongside the introduction of VAT, the government plans to remove business rates relief for private schools starting from April 2025. This change reflects a broader strategy to level the playing field in education funding and redirect resources towards the public sector.
Although the Personal Savings Allowance (PSA) will remain unchanged, more savers may see their interest income become taxable if the Bank of England base rate increases. When Income Tax thresholds stay the same while the Bank of England raises rates, it can result in a larger portion of your interest income exceeding the Personal Savings Allowance. This scenario occurs because higher interest rates generally mean that savers earn more on their savings. As a result, this could increase your tax liability. Merchant comments: “Failing to increase the PSA is a grossly unfair penalty on hard-working people who see value in putting in the effort to make their savings work harder for them. More savers than ever are being dragged into crossing the tax threshold on their savings interest, simply by being proactive and doing their best to maximise the value of their hard-earned savings.”
Personal Savings Allowance remains static
Next steps for savers and investors
Savers and investors should consider reviewing their portfolios, particularly regarding Capital Gains Tax and Inheritance Tax planning. These changes could impact your investment returns and legacy planning in the coming years. For personalised guidance tailored to your financial situation, consult a Financial Adviser who can help you navigate the latest fiscal policies.
Optimise cash savings with high-interest accounts If you’re looking to optimise your cash savings in the wake of these budget adjustments, exploring diversified, high-interest savings options could help shield your savings from inflation and taxation pressures.
the lower rate increasing from 10% to 18% the higher rate increasing from 20% to 24%
“Second, we will close the loophole created by the previous government, made even bigger when the Lifetime Allowance was abolished, by bringing inherited pensions into Inheritance Tax from April 2027.” If you’re thinking about passing on your assets, keep in mind that these changes could result in more of your estate being taxed.
That first conversation an adviser has with a client can manage expectations in terms of the level of communication; whether that is reacting to geopolitical, monetary, stock market events or when investments need to be altered for life stages.
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Investments will always move up and down and it is important to reassure clients to not make knee-jerk reactions. “Dramatic events are usually followed by recovery at some point, and clients are usually better advised to try and ‘sit it out’ until this happens,” said Fiona Tait, Technical Director at Intelligent Pensions. “The vast majority of clients are reassured by our advice and will follow it. It helps that we explain our investment rationale upfront and make sure they are aware that market conditions fluctuate, and their fund value is almost certain to fall at some point.” News headlines and hearsay can also cause uncertainty, but it comes back down to those initial conversations. “If they read a headline they are not sure about, or someone said something at the pub about investing in cryptocurrency, my clients are very good at ringing me to discuss. I circle them back round to the original planning meetings and the latest review we’ve had and remind them not freak out,” says Volker. “We know markets are going to move, we will review your plan and see if we need to update it but let’s not make hasty reactions. That’s really the benefit of the financial adviser relationship. There’s an element of constant coaching,” she adds.
Cash is an important part of investment portfolios in terms of acting as a safety buffer and being able to access emergency pots. Sometimes the market events can have knock-on effects to people’s lives – redundancies for example – so it is important to have conversations around cash from the very start. “At the outset we discuss the advantages and disadvantages of holding cash, and how cash savings are ideal for those rainy-day emergency funds. Cash is relevant, and savings and investments are complementary to one another.” Shute said he prepares clients by getting them to think about upcoming purchases and how long they might need an income for if unable to work. “We recommend every client has six months’ expenditure in cash, plus any planned expenditure over the next three years,” said Shute. This could be a new car, child going to university or big holiday, for example. “When clients are drawing an income from their portfolio, we recommend 18 months’ expenditure in cash and then three and half years in short-term bonds, where there is a lot of liquidity.” Of course, this depends on client and the life stage they are at. Younger clients may want to focus on maximising investments, taking a riskier approach with only a small portion held in cash, while later in life cash takes a more significant role to protect wealth accumulated.
Cash can help smooth market events
Navigating different life stages and market changes in portfolios can be tricky – but with the right preparation and open communication, advisers set themselves up for an easier journey supporting their clients with expected and unexpected change
“We communicate as frequently as we can, every month and then during volatile times maybe a couple of times a week, as we did when navigating Covid-19,” says Warren Shute, Chartered Wealth Manager at Lexington Wealth. When there are anticipated events that could cause change – and therefore client nervousness – communication is key before and after. “With regards to the Budget, we communicated beforehand, within 20 minutes of the Chancellor sitting down, and then once again after the dust had settled to explain what was going on.” Advisers also need to be careful to not bombard clients with financial jargon, and “build it like a cake”, as suggested by Katie Volker of Volker Financial Planning. “Keep it simple and add layers of detail as you work together. As you see your clients’ knowledge and experience develop, and they become more confident and interested in the market, their questions change. We have our regular reviews and if there is a significant market event, I will ring them and be proactive with it.” Monthly investment newsletters and social media can be useful tools to keep on top of informing clients of important events.
Focus on the long-term
20-30: Young adults
“With regards to the Budget, we communicated beforehand, within 20 minutes of the chancellor sitting down and then once again after the dust had settled”
Warren Shute, Chartered Wealth Manager Lexington Wealth
Client Relationships
Establishing the foundation of the investment portfolio & pension based on short-term goals (e.g. buying a first home) and long-term goals (e.g. retiring early)
30-50: Family years
Adapting to new needs & life circumstances such as setting up kids' savings pots, family budgeting, changes in income and inheriting assets
50-60: Empty nest
Planning for retirement by ensuring their pension plan is suitable to support their desired lifstyle
60-80+: Retirement
Start using the money saved during accumulation stage whilst staying tax efficient, planning inheritance and long term care during vulnerability stage
Early retiree
Inheritance
Life Stages
See below for more explanation on aspects to consider around cash and different life stages
When clients are drawing an income from their portfolio, we recommend 18 months’ expenditure in cash
Warren Shute,
Chartered Wealth Manager at Lexington Wealth
Vulnerability stage
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It depends on the client but those that like tech, like to see me pop up on Instagram and like that I am there consistently discussing recent event
There are various tools advisers can use to also make sure conversations are framed and can later be referred to. “We record the client meeting, and then we will send a summary out afterwards via email,” said Shute. Volker explained that she also sends a follow-up email after a call or meeting with a client to make sure there is a record of what was discussed and to confirm recommendations. Providing online access to accounts, enables clients to view their pension and investment information, including charges and performance at any point; this can further build trust and transparency in the relationship. “We have an app clients can use for planning, cash flow forecasting, and modelling different scenarios. We can model what happens if their income changes; they can see all of the assumptions that sit behind that, including assumed growth rates, assumed inflation and things like that. It helps bring the plan to life,” said Volk Social media is also a growing financial education tool, not for advice, but for updates on markets or changes in economic data. “It depends on the client but those that like tech, like to see me pop up on Instagram and like that I am there consistently discussing recent events,” said Volker.
With 66% of advisers now guiding their clients on cash, it’s clear that cash management is imperative to every portfolio and many advisers now speak to their clients about shopping around for the best savings account. Building strong client relationships demands significant time and effort. How can advisers provide personalised, proactive service without sacrificing work-life balance? Flagstone's referral portal offers a solution by streamlining key processes.
Cash is a part of holistic advice
It goes without saying that open communication and transparency are key for advisers in building a close and honest relationship with clients, but what does this look like in day-to-day practice?
“Clients can tend to focus on what they want, and they will filter out other things – and those might be the most important parts,” explained Warren Shute, Co-Founder of Lexington Wealth. Conversations around charges and costs are important to have in the initial stages of relationship development. Charlotte Walters, Chartered Financial Consultant at Avail Financial Planning, said she spends 10-15 minutes talking about charges in the first meeting with a client. “I explain what they’re going to pay and the breakdown in terms of proportion for advice. I then explain how they will pay – some people ask if they can send a cheque, but I make it clear that payment happens automatically. There is no point in doing all the work and discovering in the second or third meeting that they are not comfortable paying your fees,” she added.
Advisers’ toolkit
Ongoing trust
Keeping up a strong relationship takes work beyond the initial meetings. Clients may need reassurance during volatile markets or extra help due to a life-changing event that has affected their finances. “You might be working with someone for three years, it doesn’t mean you have built the relationship and ‘tick’ it’s done,” noted Volker. “It’s ongoing, you need regular touch points, and you must always be curious because what is important to your client can and will change. A parent might become ill, they might change jobs… you must be reactive, open, available, non-judgemental and objective,” said Volker.
The referral portal empowers advisers to provide exceptional client service through transparency, the ability to track every application, and ultimately, helping clients reach their financial goals through ensuring they’re always earning competitive interest on their cash.
Building close relationships with clients starts at the very beginning; with the first meeting exploring expectations from both sides. “When I onboard clients, I carry out a personality test. Do they fit with me? Do I fit with them? Am I going to deliver benefit to them? From the start my clients have reassurance,” said Katie Volker, adviser for Volker Financial Planning. Clients, most importantly want to be listened to and understood. “Take the time to get to know the client before you make a recommendation. Everyone wants to feel heard so double check what they are saying and ask questions; ‘this is what I think you have said, am I hearing this right?’, for example,” she said. Clients can often talk about their goals quite easily but can be difficult for them to understand and articulate what they don’t want.
Establish expectations on both side in the first meeting
Top tips to build close relationships with clients
Address costs and charges as early as possible
Send a summary of discussion points after each call or meeting
Touch base in times of market volatility
Be open and available, non-judgemental and objective
Katie Volker,
from Volker Financial Planning
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The financial advice landscape is set for a shift next year, with a focus on personalisation, education, and adapting to changing circumstances. Here's a breakdown of the key trends
A man is more likely to seek financial advice than a woman, and currently in the UK half of advised clients are male and two-fifths (43%) female – the gender of the remaining 7% is not specified . This is largely attributed to the gender pay gap, a lack of understanding and risk aversion among women. Although there have been various initiatives to tackle this, the gender pay, pension and advice gaps remain stubbornly wide, with some predicting it will take 90 years before the gender pension gap is closed. Nonetheless, the efforts to address this are ongoing and will be a key feature of 2025 as well as the years after. Increased transparency and education around the need for financial security are a key focus for advice firms, and there are efforts to reduce the gender pay gap. Flexible working, improving recruitment processes and returner policies should lead to women becoming more curious about ways to enhance their pension and savings.
2. Gender advice gap
Advice is moving away from talking about just money and numbers, it’s very much about what you want to do and when do you want to do it. “Having software available to help us streamline the management of this in one place is extremely helpful,” said Charlotte Walters, Chartered Financial Consultant at Avail Financial Planning.
1. Goal-based planning
After Rachel Reeve’s first Budget in October 2024, there are also many other potential changes that will need to be considered next year. If pensions become IHT-able, a lot more people will have to access them. “If this goes ahead, the whole advice space is going to change quite dramatically,” added Walters.
The coaching element of financial planning is becoming more important, especially through market changes. “We don’t want the knee-jerk reactions, we want the long-term mindset, the classic style of investing for decades rather than days. Strengthening relationships will be key to this, and having evidence behind financial plans,” said Katie Volker, from Volker Financial Planning. Coaching and educating will play a part in making financial planning more accessible, she added, and therefore help narrow the advice gap.
3. Education and coaching
Coaching and educating will play a part in making financial planning more accessible and therefore help narrow the advice gap
Sources 1. www.ftadviser.com 2. www.pensionsage.com
As much as it is important to think about the long-term, advisers will be keeping an eye on the UK market and economic conditions to help guide portfolio decisions. 2025 is set to be a very different investment landscape to 2024, with a falling interest rate environment, inflation on the downtrend, and new political agendas in the UK and US. Advisers should be reviewing portfolios with clients for any overallocations to areas of potential increased risk, and seeking new opportunities where they align with client preferences.
4. Changing market conditions
5. Artificial intelligence (AI)
In 2025 there will certainly be an increased interest in how financial advisers can benefit from the growing use of AI tools within their practice This could be in terms of gathering and analysing data, reducing resources and hours spent on administration tasks, communicating with clients, investment research and even to assist with regulatory compliance. There is an abundance of opportunities within AI for those that are mindful of the drawbacks (negative effect on client relationship and machine failures, for example), as well as the benefits.
Q&A: Lynne Gadsden, Chartered Financial Planner at Eight Wealth Management
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It is very important as I deal with a lot of older, vulnerable clients. Therefore, I look to spread across using the FSCS limits as much as possible.
Is it important to you to have peace of mind for cash protection? What do you look for to ensure this?
Which accounts do you use Flagstone for?
I often suggest to clients on Flagstone they use a mix of instant access, fixed terms and notice accounts. I know there are different currency options too, but I haven’t used these yet.
Yes, I’ve used Flagstone for many years now. Mainly for clients who have cash sitting around in lots of banks or too much in one. I use it as a way of consolidating accounts to make it easier – only managing those accounts on one platform. Flagstone works for those with cash in one bank as it gives them increased security with the greatest amount of Financial Services Compensation Scheme (FSCS) pickup, and it’s preferable to trailing around lots of different providers. I deal a lot with clients who have sold businesses or land, or are getting divorced, or have an inheritance… the Flagstone platform is a great place to put money for a short time while they ‘catch their breath’ and decide what they are going to do in the future with it. Then we often start to make investments, but whilst leaving their ‘short term’ money or emergency money with Flagstone. I’ve also started using it myself and that is a great way to see how it works from a client’s perspective!
Cash is very important, and I explain to clients that it is not just for the everyday items but the things that could go wrong
I understand that you are a user of the Flagstone platform. What do you use it for?
I start by getting to know them and their family – being open myself and getting them to open up. I explain about my many years of service and qualifications, and what that means in terms of how I can help them and their financial needs.
When you meet a new client, how do you start to build the relationship and trust in your business and expertise?
How do you maintain client confidence?
It is important to be efficient and to do what I say I will – following through with my commitments. At the same time, not overpromising and underdelivering. I always try to keep it relaxed and friendly.
How does the conversation around cash evolve throughout the life cycle of your work with clients? What is important to consider (on cash) throughout the different life milestones?
Cash is very important, and I explain to clients that it is not just for the everyday items but the things that could go wrong – that is why an emergency fund is so important. Also, I ask if there is anything they may need to spend in the next five years such as larger items like cars, moving house or for my older clients going into care. This is when it is extremely important to consider putting enough to cover those expenses in cash. Many of my clients also like to retain cash to help family out as they get older.
Advisers are able to onboard offshore clients from around the world through Flagstone International
Global reach
Clients have 24/7 online access and immediate visibility and control of money
Control
Users have access to consolidated inflation across all cash-deposit accounts, and can receive a single tax certificate at year end
Holistic view
Benefits of using Flagstone
Clients can spread money across any number of banks and receive FSCS protection of £85k (individual) or £175K (joint), each time
Secure
A multitude of accounts are available ranging from instant access to fixed-term deposits, allowing a tailored approach to client needs
Flexible
Rates are constantly updated to ensure market-leading rates
Competitive
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