Challenges and opportunities

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.

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.

38% of paraplanners believe consumer duty will increase their workload.

59% see workload as the key barrier to adding value.

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.

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.

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.