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Challenges and opportunities

Ranila Ravi-Burslem
Ranila Ravi-Burslem
Intermediary Distribution Director, Scottish Widows
  • Paraplanners cite the administrative burden of regulation as the top industry challenge.
  • Paraplanners see the next generation of clients as the biggest opportunity for the industry and
    technology is key in securing them.
  • Heavy workloads are a key barrier to paraplanners adding more value for their firms.

Challenges: Paraplanners see regulation as the biggest headwind

Paraplanners tend to have frequent touch points across all aspects of the advice process and from top to bottom of any given firm, given their wide range of responsibilities. While a paraplanner’s primary function might vary considerably from firm to firm, the profession certainly offers a truly unique vantage point across the industry as a whole.

When asked about the biggest industry challenges, regulation emerged as the clear number one concern. Over a quarter (26%) of those surveyed specifically referenced regulation as the biggest. challenge facing the sector, with Consumer Duty ranking ninth place in its own right.

The phrases ‘constantly changing’ and ‘overregulated’ were heavily used, with ‘uncertainty’ in regard to regulation also being a common theme.

What do you think are the biggest challenges facing our industry?

Red, orange and white coloured word cloud graphic that depicts the biggest industry challenges for paraplanners.

A recent example of the challenge here is provided by the political uncertainty around changes to the lifetime allowance. It is difficult to make long-term planning recommendations in the face of such potential short-term uncertainty. This can be one area where it is useful for firms to access pensions technical experts not only for the latest updates but also because they tend to be well plugged into the nuances of the government’s pensions legislative framework.

As paraplanners are often the ones dealing with the administrative burdens of changing regulations, it’s unsurprising that this is a major concern.

Large 38% and 59% statistics block

Over a third (38%) of those surveyed believe Consumer Duty will lead to an increase in workload for paraplanners. Now that the implementation deadline is behind us, the impact of meeting the Duty and, for example, evidencing customer understanding of reports, will be front of mind for many paraplanners.

It is also interesting to note that this figure rises to more than half (53%) for those under the age of 30. Could this be a sign that younger paraplanners are expecting to take on the bulk of the legwork associated with Consumer Duty? Or is it possible that younger paraplanners have been less involved with Consumer Duty preparations until implementation and are more concerned as a result?

As the FCA is taking a greater interest in the journey of advice, rather than just the final destination, it makes sense that this would heavily impact paraplanners, as this is exactly where they show their worth. The increase in workload is unavoidable as advisers require more detailed record keeping, more thorough reporting and increased transactional communications, for example in checking client understanding of terms, strategies, or charges – all of which could easily fall within the purview of a paraplanner.

A 59% majority stated that ‘workload’ was the key barrier to them adding more value within their firm. With the Consumer Duty now in effect and only likely to compound workloads, that figure may well grow as we move into the second half of the year and beyond.

Moving down the list of challenges, AI surprisingly ranked in second place, followed closely by DIY advice via online tools. Although a lot has been talked about AI either threatening the role of paraplanners or augmenting their productivity by ultimately adding to their arsenal of tools, the effect that AI could have directly on the end user in providing advice is a challenge of its own.

Opportunities: Intergenerational planning and new technologies

When we turn to opportunities, AI also makes an appearance – ranking fourth – suggesting that opinions are still mixed and undecided at this early stage of development. At present, everything points to a vital human interpretation being required for the effective use of AI in most industry settings. However, if AI tools were to develop to the point where they could offer an alternative to the advice industry as whole, this would swing the pendulum from opportunity to threat.

Paraplanners believe the next generation of clients and intergenerational planning is firmly at the top of the list of opportunities for the industry. This is a really important area to consider as many advisers do not have succession planning in place, meaning that their clients’ dependants often seek new advisers, rather than sticking with the firm that has been managing their inherited wealth.

What do you feel is preventing you from adding more value?

Many respondents paired servicing the next generation of clients with the use of technology, stating that there is an opportunity to onboard a new generation of young investors centred on a more technology-driven, lower-cost advice service. This makes perfect sense when you consider roboadvice as a key competitor.

When asked if there are any specific technologies that would benefit them or their firm right now, of those paraplanners who could think of a specific technology, 46% named AI/ChatGPT. So while the longer-term impact of AI is yet to be determined, it does seem likely that, in the near future, a good number of paraplanners will be using AI and ChatGPT-like tools to do much of the heavy-lifting work associated with compiling a suitability report for example. These pioneering paraplanners could establish a new way of working as early adopters and light the way for others in the industry to follow.

What do you think are the biggest opportunities for financial planning firms?

Specific technology that would be beneficial (those that could think of a specific technology)

Analysis

Intergenerational planning has never been more important...

Wealth tends to pass down only on death, which is still something of a taboo even in financial planning, so there is considerable scope for advisers and paraplanners to promote a more proactive approach that maximises tax and trust planning efficiencies.

Given the greater impact of the cost of living on younger generations and the incidence of longer lifespans, it could be useful, for example, to consider the ways in which some wealthier clients could pass on excess retirement income to dependants now. Intergenerational planning has never been more important and there is lot of support that advisers can access from platform providers, including Scottish Widows, in the form of platform tools and technical expertise.