Predicting the Key Themes of 2024

We are now a few weeks into 2024, with the festive period a distant memory. To kick off the new year for the Navigating the Future of Wealth Management Blog, I wanted to highlight some key themes I think are going to be prominent in the year ahead. These are collated from various readings, discussions, meetings, and events I have read, and attended throughout the end of 2023 and to start this year so far.  

So, here are my three key trends of 2024!  

AI Integration in Financial Planning  

AI being a key theme in 2024 is hardly a hot take after it dominated the news and discussions in 2023. NVIDIA stole the show in the stock market last year with the US AI Giants returning investors 234% in a 12-month period and being one of the so called ‘magnificent seven’ to drag the S&P 500 to a 24% return on the year, something none of the major banks had forecast. However, I include AI in this list as although AI is a widely debated topic and driving runaway stocks, it has not yet become widely embedded into the financial planning process, and I think 2024 is the year that it is.  

Not fully and not yet on the advice side but in the compliance and operations side of Financial Planning, I think AI is going to become integral. The ultimate evolution of AI in Financial Planning is enabling low cost, easy to access Financial Planning and ending the Advice Gap but it is not yet ready. It is still the case that only 41% of people in the UK have a financial plan at all and so this remains a huge opportunity for our industry to crack.  

There are still barriers in the way to achieve this though with regulations around AI based Financial Planning not yet in place, though I do think the introduction of the FCA’s recent paper on ‘Advice Guidance’ is a good first step. Away from regulation, trust is the most prominent issue with AI, not helped by the recent documentary on the Horizon Post Office scandal (‘Mr Bates vs The Post Office’ which is well worth a watch by the way!) and the media firestorm around it and the introduction of AI into our lives. Though the connection between Post Office Accountancy Software and Generative AI is a very tough one to make…. in my eyes, it still is…  

Instead, AI will be integrated to make financial planning faster via a complete overhaul of the onboarding process. With 41% of advice firms already using technology to conduct risk profiling for clients as per Dynamic Planners excellent ‘The financial advice landscape in 2023’ report, the appetite is there. AI can now speed up the process in partnership with Open Banking tools. Advisers will then be able to spend more time with more clients, a win for advice firms and a win in the battle with the advice gap.  

Utilising technology will remain a common theme of the Navigating the Future of Wealth Management blog as I think its adoption and the constant advances, we are seeing are pivotal in shaping the future of our industry. Driving down costs, maximising efficiency, and ultimately leading to increased accessibility.  

If you are looking for somewhere to start integrating AI into the Financial Planning process, then Conquest and Multiply are very impressive examples.  

Consumer Duty and the Squeeze on Fees  

In the financial planning landscape of 2024, the twin forces of Consumer Duty and fee compression are sure to be major themes and are both shaping a new era of transparency, fairness, and accountability. As regulatory landscapes evolve, financial planners are navigating a delicate balance between delivering value, a race to the bottom on charges and ensuring they can keep the lights on.  

‘Fair Value’ is the key to Consumer Duty. Both for advisers to be providing fair value to their clients but also for clients to understand the value they are getting in access to a Financial Planner. I think that second part is discussed a lot less than it should and I hope it becomes more prominent in discussions this year.  

A recent article in the FT by Sonia Rach stated that ‘Two-thirds (65 per cent) of those with a plan have seen their total wealth increase in the last decade – almost double the amount of those without a plan (38 per cent)’ so the value should be clear enough to demonstrate. In fact, a Vanguard study showed that on average those investors working with a Financial Adviser add up to 3% a year on average to their returns than those that do not seek advice. So, from an investment perspective alone, if the adviser is not charging more than the value they are providing, and 3% would be a hell of an ongoing fee to take, the client is winning.   

Consumer Duty has rightly shone a light on fees and transparency around fees but the value in Financial Planning needs to be promoted more. Advisers I speak with are feeling the pressure to reduce charges but are also being hit by more regulations and more reporting which takes time to complete and reduces time with clients, therefore impacting income. The rhetoric around Consumer Duty can be flipped effectively to justify fees through the ‘fair value’ that advisers provide to clients.  

The Rise of Subscription-Based Financial Planning. 

My final theme of 2024 ties the previous two together and highlights an adviser business model that I think is going to be the key to unlocking financial planning for my generation. We are used to subscriptions and have direct debits set up for everything from phone bills to Netflix to gyms to coffee subscriptions. Why should financial planning be any different?  

Well historically, the issue has been the profitability of working with less affluent clients. Let’s work through an example. If a client has £100,000 invested, a dream for the majority of people my age, and an adviser charges a standard 1% AMC then a monthly subscription works out to be £83.33 a month, certainly in the higher bracket of subscriptions but when people are paying £100+ for gym memberships, you could see a world where that works if the value of having an adviser is shown. The issue is when the value of a portfolio increases and after all, isn’t that the goal?  

The debate then is should the fee an adviser makes increase in line with investment returns?  

Subscription decouples the link between advice and investment returns and for me that is a good thing. Ensuring financial planning focuses on objectives and goals rather than solely linked to the returns made by investment managers. Investment Managers should be remunerated on returns, advisers on the ongoing service they provide to their clients.  

This then ties into the conversation around ‘Fair Value’ and Consumer Duty. Fair Value then lies purely in the advisor proposition and not the percentage increase of a portfolio linked to endless global and macroeconomic variables.  

I think a subscription financial planning model that shifts the dial into incorporating financial planning into lifestyle planning and perhaps links in with discounts to things like Class Pass, Soho House, and Third Space etc, would be a fantastic way to engage HENRY (High Earner Not Yet Married) clients.  

In conclusion, 2024 is set to be a very interesting year in Financial Planning. I think everyone, advisers, providers, and the regulator, is keen to connect with the next generation of investors and that is going to be the overarching theme of the year. AI is the key to unlocking lower cost financial planning which in turn aids the Consumer Duty discussion and creates an environment where financial planning can be provided to the consumer in the way the consumer wants it, in a subscription model.  

As we go through 2024, my goal is to remind myself of these predictions and to check in to see how we are getting on.  

I would love to know your thoughts on this and what you think are going to be the key themes of 2024 and beyond!   

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