Most of the future is predictable - at least broadly - and an industry that prides itself on insuring the future, investing for the future, or planning for it should be ashamed if it can't chance a few predictions. So here goes my shot. Drop me an email with yours and we'll keep publishing them:
There will be so much talk about regulation you will get heartily sick of it - apart from a few dedicated policy wonks who get excited by supervisory models and theories of advice. Brokers, planners, and sales managers, will especially suffer from reg-fatigue. Hopefully the industry will recover from the collective delusion that at the next milestone 'all will be revealed'. It hasn't been at each of the last three. Time to start inventing the future before you simply become a pawn in someone elses game.
The standard of advice will rise, but the volume will fall. Credit crunch, finance company failures, and a dramatic slow-down in housing all guarantee that investors will be more willing to turn their ear towards the sensible approach of diversifying and employing professional managers. But, sadly, the volume of advice given will fall considerably. Having noticed that the first 10% of financial advice gets you 90% of your wealth (study hard, work hard, spend less than you earn) I think this bit is a shame. You might hate the folks down at Rich Mastery, but their guide to saving money while you shop came right out of a mainstream budget adviser's handbook. Hopefully burned property investors will carry those lessons with them into better diversified portfolios.
Recruitment will slow, just when it should, in fact, increase. Uncertainty and bad news are not great macro-environmental factors for recruitment. Combined with a pretty robust labour market, and generous welfare (where else can you get $60k plus for being unemployed) it will not be a big year for new people joining the industry. Except at larger banks and fund managers - they've got KiwiSaver to keep the tills busy - the consequence is that the independent sector will once again shrink relative to the whole. It will keep doing this for a number of years. The reason why it should increase, is because financial services is one of the best rewarded occupations (for employees) and sectors (for the self-employed) and as barriers to entry look set to rise, new recruits should get in now while it's cheap.
Innovation in advice-giving will come from the corporate sector. The next few years will see little innovation in advice-giving, and especially high-advice services. What innovation there is will come from the corporate sector. Independent advisers are in a phase of codifying advice which is likely to see it solidify - rigidity is not the ideal environment for innovation. Whereas corporates, driven by the relentless need to grow will respond by examining what advice is, breaking it down into manageable chunks, and seeking to automate, systematise, and deliver it through a variety of mechanisms to a market that is hungry, above all else, for advice.
Credit crunch news will worsen before improving. One fund manager I spoke with recently says it'll take another six months before we're past the worst. My pick is a year... witha fair amount of residual debris for a while after that. Beneficial side-effects will be less leveraged investment, more focus on income rather than asset growth, and some bargains for the brave as we go through.
Financial services will continue to enjoy a place in the sun: lots of government focus, KiwiSaver as an issue in the election (it may even turn up on a taxpayer funded pledge card - grrr!), and all that bad news - will keep proper financial journalists, plus yours truly, busy at their keyboards, and will better placed articles across more column inches in papers, internet, TV, and radio across the land.
It's a great business to be in, and I can't wait to get stuck into 2008.