“However, I’m sure there are many people who have been paying recurring fees and not received a service they have valued, [and] it would be those clients who may be enticed by digital offerings, including Vanguard’s.”
Binney at Wealth Wizards adds that Vanguard and others in the advice market are unlikely to be a threat to smaller, bespoke financial planning businesses, which need perhaps a few hundred clients to be profitable and continue trading, and which are largely replenished and grown through referrals.
But for larger companies looking to grow their businesses, especially into the lucrative mass affluent/advice gap market, it is becoming increasingly competitive, says Binney.
“Early adopters will steal a march on their competitors because hybrid advice offerings need to be built on trust and incremental engagement with the customer.
“And once part of the service, clients are likely to remain loyal to it. Laggards to the market could well become the Blockbusters to the Netflixes of the financial advice world.”
Although Vanguard is for now focusing on offering advice to clients saving for retirement, a spokesperson says: “Since launch, we’ve been serving clients, building relationships with them, and importantly gathering feedback on the kind of additional features investors are interested in.
“Over time we will also cater to people in retirement, and those with other investing goals.”
Christopher Morris, deputy head of financial planning at professional body CISI, says it would be naive to dismiss new services and argue that they will not be able to compete.
“Attracting the next generation of clients is important, to understand their needs and to work with them in a way that suits them.
“Based on my experience, the relationships that our financial planning members have with their clients are extremely strong and have been built over many years.
“However, if these ‘family’ clients are to continue to work with the firms in the long term, then the importance of adapting the client experience for the next generation will be key.”
Chloe Cheung is a features writer at FTAdviser
