I love a traditional London pub or end-of-the-street boozer. In the 80s, I regularly frequented these, my primary way of socialising and listening to live bands.
Many are gone now, closed and converted into terrace housing, commanding eye-watering prices. Pubs evolved slowly after the 80s, clinging to their roots. Some changed and improved, but it wasn’t until 2007 that the perfect storm of transformation brought about the “change or die” mantra.
2007 brought in the ban on smoking in public spaces. They said that the smell of beer-encrusted carpets would put anyone off entering immediately after the ban was brought in. For years, tobacco smoke had obscured the beer fumes. No longer, and pubs had to fit new carpeting speedily.
2007 coincided with new generations not considering using pubs to socialise. Social media started, enabling people to mix with others without going to pubs. Many chose not to have an alcoholic lifestyle, preferring a restaurant meal. Sky and BT Sport changed their pricing structure to allow sports fans to watch live sports at home. The beer duty escalator ensured prices rose yearly, and supermarkets stepped up their price war by offering cut-price booze. This inspired the ritual of “pre-loading” before a night out.
Gone are the days of “mortgage…next one please…cashier number two please”.
The Financial Crash decimated the disposable incomes of many, and they could no longer frequent expensive pubs. Music streamed for next to nothing or downloaded for pence, and the rise of open-air rock festivals satisfied people’s desire for live music.
A perfect storm.
According to Statista, the number of pubs stood at 51,000 in 2007; this number fell below 40,000 for the first time in the second half of 2022. The remaining outlets have mostly pivoted to restaurants and are remarkably different from my London boozer of the 1980s. The pubs that have survived have metamorphosed into luxury eateries. A far cry from their origins when a meal consisted of a pickled egg and a packet of nuts, if you were lucky.
Similarly, I see the provision of regulated financial and mortgage advice rapidly changing since we also have a 2007-style perfect storm.
Let me explain
The FCA has perennially fretted about the advice gap. There is a dire shortage of advisers giving financial advice. There are plenty of mortgage advisers, often seen as the entry-point, but since RDR in 2012, the number of financial advisers has fallen from the cliff, with thousands retiring each year. With this in mind, the regulator is bringing in a new way of giving advice, allowing for a lighter regulatory touch. Cheaper to run and more straightforward to operate. The advice won’t be complex, but it will cover all the areas clients need – holistic rather than specialising in wealth management.
The new regime will harness robust technology – something the banks and other providers have in-house. Banks have been spending billions on tech to ensure they can give app-based advice. Look at their success with mortgage product transfers, quickly consuming most of the available business, leaving mortgage brokers in their wake. The banks are hungry to find a way to combine this tech expertise with a low-cost model of people-distributed advice.
Mortgage brokers and advisers have experienced holistic advising over the last few years, as many have experienced discussing client’s protection needs. They’re also getting very good at it, becoming highly skilled at fact-finding clients’ needs and looking at their life goals. The strict mortgage-only lens has been removed as they embrace the holistic viewpoint for client needs. These same brokers are now seeing the value of a client bank that you can revisit annually or more often to revise needs and give advice. They see that their brokerage is only as valuable as their client banks. Gone are the days of “mortgage…next one please…cashier number two please”.
When the mortgage market picks up again next year, the vanilla mortgage customers will flock to providers directly as they ramp up their tech and artificial intelligence chatbots to lure people in. They’ll provide low-cost advice, self-selection and cheap margin-thin rates. Specialist finance and complex mortgage cases will be the preserve of brokers. And there won’t be enough to go around.
The outcome? Possibly brokers who don’t change, withering on the vine like my street corner boozers. A few will persist and will dominate their niche lending market. Still, the majority will change into more holistic financial advisers.
These new highly mobile financial advisers will work with clients who couldn’t see a traditional IFA because their net wealth or income is too low. But the simplified advice regime will allow for this. These new advisers will counsel across the whole area of needs ranging from mortgages and protection to later life advising – equity release and pension drawdown. They have client banks that they preserve and nurture.
Networks will evolve to handle these self-employed advisers. Banks will create newly employed positions; much will be conducted with tech doing the heavy lifting, advice being relatively straightforward and cost-effective for both the adviser and client. Complex advice will still be the preserve of a traditional chartered financial adviser.
A perfect storm. Can you see how you might evolve over the next few years?
