“Five factors that changed the game in 2024”

Every year, when I sit down at my desk to look back on the last 12 months, I feel the same conflicting emotions. On the one hand, the feeling of how quickly another busy year has passed. On the other, astonishment at everything that happened during this period.

This year, that seems more true than ever. A regulator that demands quality financial aid for all, a government determined to invest and a technology sector that is progressing at dizzying speed are together driving changes that look more like a revolution than an evolution. Here are five game-changing factors in 2024.

1. The consumer’s duty (again)

The consumer duty took almost 18 months to be introduced, and the conversations I had with people who expected the new regime to continue as business as usual now seem distant. By the end of 223, the Financial Conduct Authority had already made clear that it would expect firms to provide an ongoing service for an ongoing fee – and be able to demonstrate that they do so. were doing. This year it has doubled.

In February, the regulator wrote to businesses asking for information on their ongoing advice. Dear CEO’s October letter reminded businesses that this problem has not gone away.

Advisory firms face increased pressure to take into account specific client needs during disbursement and to adequately consider revenue sustainability.

The result was an emphasis on the annual review: from October 2023 to the same month of this year, the number of review reports generated in Dynamic Planner increased by 127 percent.

We have also seen businesses struggle to provide the required level of service to their lower value customers. Fortunately, the impact on the lack of guidance may only be temporary, as the FCA is already taking steps to plug the hole . . .

2. Tips for the masses

. . . in the form of the Advice Guidance Boundary Review, which aims to provide advice and support to more of those who need it.

All indicators suggest that targeted support, at least, will take place: the political will is there and the regulator continues its consultations and policy sprints. Simplified advice still appears to be in play, but could provide a powerful gateway for the next generation of customers.

With the Consumer Duty, the FCA ensures that holistic advice is the gold standard. Together with the Advice Guidance Boundary Review, this will potentially open up a suite of alternatives – whilst clarifying the boundaries between them and giving businesses greater clarity and flexibility in their comprehensive advice offering. Together, these changes could redraw the map of the sector, attracting new players, reconfiguring existing activities and creating a continuum of support throughout the client’s wealth journey.

3. Focus on choices in retirement

In line with its efforts to improve consumer investment standards, the regulator has also focused on retirement choices this year. The thematic review of retirement income advice, published in March, highlights the increased complexity of decisions for consumers in the process of or in the process of decimulation, as well as the greater potential for risk. Advisory firms are facing increased pressure to take into account clients’ specific disbursement needs and to adequately consider revenue sustainability.

As more people opt for the payout system, it is critical for us as an industry to ensure adequate retirement income. What are the components of success?

Firstly, a unique approach to risk profiling, used consistently and revisited throughout the client’s wealth journey, allowing you to capture changes in client attitudes and preferences before and during retirement.

Second, a retirement income questionnaire that helps you and your client set clear priorities: consistent income over flexibility, for example, or continued affordability rather than the desire for a lump sum.

Finally, quality cash flow planning, based on data you can rely on and assumptions you can justify, and which supports an understanding of the uncertainty inherent in modeling the future.

4. New horizons for individual investors

In her first speech at Mansion House, Chancellor Rachel Reeves left no doubt about Labour’s commitment to investment as a tool to drive growth. Reforms first launched by the previous government will open up infrastructure and other private assets to end investors through their pensions.

Both the Government and the FCA have indicated that this change represents a recalibration of the balance between opportunities and risks. Measures taken after the financial crisis introduced important protections, but also excessive caution – Reeves described the status quo as “risk regulation, but not growth regulation”. In the UK, scandals like Woodford’s have added to the nervousness.

Consulting companies face many changes simultaneously. Fortunately, they also have help in the form of their technology.

But the real lesson from Woodford is not that some assets are too risky – as always, it depends on the client’s appetite – but that risk sets in when you don’t know what you’re holding. Private assets represent potential new sources of yield, income and diversification, but understanding what’s in your clients’ portfolios and being able to assess the associated risks, particularly around liquidity, will be more important than ever.

5. Rapid technological change

All in all, this means that consulting firms must deal with many changes at once. Fortunately, they also have help in the form of their technology.

Businesses have recognized the power of the data they hold about their customers and have worked hard to clean it up and integrate their systems to enable them to take full advantage of it. Now the most important global theme of the year – artificial intelligence – can unlock its potential, helping you accelerate processes and increase productivity in your full-service consulting business, while seizing new opportunities such as simplified advice.

Another catalyst is the rise of financial planning apps. With customers already accustomed to doing everything on their phones, mobile apps offer pathways to deeper relationships, streamlined communication, and demonstrable delivery of ongoing service between review meetings. This is just one reason why this year’s developments point to an exciting year for the industry in 2025.

Ben Goss is Managing Director of Dynamic Planner