Old adviser tech baffles young advisers

24 Feb 2023

Third Financial's Group CEO, Ian Partington, featured in today's edition of Citywire New Model Adviser, reflecting on what young advisers want from their firms' tech stacks.  Read the article here



Opinion: Old adviser tech baffles young advisers
Ian Partington, CEO at Third Financial, reflects on what young advisers want from their firms’ tech stacks.

Millennials are shaping up to be the first generation in UK modern history to be worse off financially than their parents were at similar life stages.

This has been fuelled by runaway property prices locking them out of home ownership, the significant debt taken on to gain a degree and compete in the job market, and the seemingly entrenched position of the UK as a low-growth, high-tax economy. This millennial generation – born between 1980 and 1995 – is also contending with returns on savings and investments that may be lower than those once enjoyed by baby boomers.

Five-year US government bonds yielded about 15% in the early 1980s, and the S&P 500 traded on a price-to-earnings ratio of around eight. Today, these figures are around 4% and 22 respectively. In other words, bonds and shares are now far more expensive. Meanwhile, what McKinsey called an ‘extraordinary confluence of favourable economic and business fundamentals’ has ended: inflation is back with a vengeance, interest rates are rising, and populations in the developed world are ageing.

This is a poor starting point on which to build a financial future. At the very least, it points towards the fact that millennial clients will need a very different style of advice – and their contemporaries are likely to be best placed to provide it.

We often hear about the great wealth transfer on the client side, while less attention is given to advice businesses themselves needing to adapt to attract and retain a younger cohort of employees.

Virtually everyone working in the advice sector will have seen statistics showing the perilous number of advisers in the UK. FCA data from 2021 showed 23% of advisers were under 40, coinciding well with our millennial cohort. Meanwhile, about half were over 50, with many likely to retire in the next few years.

This raises an interesting challenge for advice firms, who need to ensure their businesses are future-proofed, not just so they can woo the children of their clients but to ensure they are next gen-friendly employers.

These workplace digital natives no longer expect cutting-edge technology to do their jobs. They demand it. The clamour for more modern systems is now coming from across the office.

While millennials are sometimes stereotyped as being overly demanding employees, these demands are entirely justified. The adviser segment lags other financial services with technology, and the time wasted by using antiquated systems is crazy.

We have spoken to firms that – often thanks to merger and acquisition activity over the years – are running up to 20 platforms. Imagine the hours lost to forgotten passwords, dual-keying, and mastering these different systems. This inefficiency baffles younger advisers, who came of age with Uber, Monzo and Apple – incredibly user-friendly and intuitive technology. Whereas their older colleagues remember fax machines and may be grateful for today’s relative ease of doing business, millennials consider any system that isn’t completely seamless to be unacceptably cumbersome.

Meanwhile, the advice sector is facing challenges including fee pressure, rising costs and further layers of regulation. This comes atop a cost-of-living crisis that is increasing drawdowns and impacting client sentiment. The best course of action is to adopt modern technology to reduce the administrative burden, leaving more time to focus on the much more rewarding task of providing excellent client service.

Firms looking to recruit the best talent and to scale their businesses need to simplify their operating models and future-proof their technology stacks, meaning new colleagues and clients – especially the next generation – are attracted and retained.

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