Lawyers and Financial Advisers Must Interact

Over the final decade, access to financial advice continues to be reducing. If left unchecked, a number of our shared clients and prospects could face a less secure future.

Currently, there are just around 27,000 financial advisers in the UK, roughly a fifth of the total number of lawyers. Consequently, use of legal services is continuing to grow whilst use of financial advice have reduced. This has led to lots of people not understanding their complete budget, including services supplied by lawyers such as Wills, Power Attorneys and Inheritance Tax and estate planning.

As professionals we understand that, whether in person or via video conference, professional advice is important for most of us. Technology can help us perform our jobs, but currently robo-advice isn't what most clients want, so a solution must be found for any greater number of individuals to receive sound financial advice.

Challenges

A major issue for the provision of mass market financial advice is the ageing profiles of numerous advisers, the majority of whom are approaching retirement. A contributory issue is that many of those people seeking advice are turned away because they do not meet an adviser's wealth threshold, since most of the is predominantly thinking about high net worth individuals searching for investment solutions.

The financial services industry has also experienced a small amount of providers adopting poor practices over the past few years which has damaged the industry's reputation. To a lesser extent the legal services sector has additionally suffered from the act of the CMC market, leading to fewer people choosing the support of advisers.

There is really a solution, and collaboration with lawyers is essential

It is unlikely that we'll create a financial services industry with sufficient advisers to aid the needs of the population individually. But what we should are seeing is a greater focus on employers taking a lead when it comes to their workforces' financial welfare.

Uber's recent offer of Automatic Enrolment pensions to its workers highlights a general acceptance that employers will need to do more in the future to support the financial welfare of their employees. Similar moves are likely along with other businesses that engage gig economy workers, along with other government measures, such as the changes to IR35, are likely to see more self-employed workers proceed to the payroll.

Here, there lies a chance for both financial advice and consumer legal services. For the last six months we have been trialling an economic advice service that the employer sponsors and it is available to all their employees.

This provides use of a captive market with the employer providing the service as part of their compensation and benefits package. The business covers the cost of an individual's financial review which supplies a company by having an understanding of their total finances. This includes their personal and employer sponsored pension, life along with other protection products and savings and borrowings. Additionally, it covers Wills and POAs with any identified needs being forwarded to an attorney.

From an employer's perspective this adds significant value in that their employees will better comprehend the worth of their benefits package – which research suggests most employees don't. Given that many employees may have pay freezes for that foreseeable future, boosting knowledge of how employee benefits could equal an extra 3-20% of the salary could be immensely important.

But what is also clear is that there's scope for broadening the offering, including Wills and POAs and extending it to the likes of IHT and estate planning.

We recently conducted a survey amongst nearly 350 employees of an education provider and client HCAT in the North East of England. Laptop computer clearly demonstrated that people do not differentiate between the services of either lawyers or financial advisers and found the third-most important financial subject they would like to find out more about was Wills. 40% of these surveyed said Wills were a subject of great interest. Topping their email list was pensions at almost 80%, and savings at 50%, but Wills were more important than mortgages, protection, investments, budgeting, tax breaks and other company benefits.

It is apparent, in our experience and according to this type of employee research, that greater co-operation between legal services firms and advisers would be the future.

Addressing reputational issues

It's a regrettable fact that those things of a minority of people have damaged the reputation of a business. Area of the problem is that customers lack the resource and knowledge to carry out the sort of due diligence that the corporate entity would.

In our vision of methods mutual cooperation allows for an employer-centric offering, the issue is easily resolved. Identifying the wheat from the chaff is less difficult when an employer is within control as they possibly can carry out a proper due diligence procedure for suppliers. This can ease the procedure when whether lawyer or financial adviser already offers services for an employer and wishes to extend this to a broader service supporting their employees.

To the future

Setting up a guidance service for employers will reap returns long term but requires a significant investment, in time and money, for the short term.

I foresee a business model where financial and legal services collaborate in offering some pot plan to employers as well as their employees. This type of partnership has never been so timely, and against our current societal and economic backdrop, essential.