When I came back from Iceland in 1984 I met an IFA and asked him what his job was about.
There are two types of people I talk to- those who have money and want to hold onto it and those who don’t and are scared.
I was only 23 and was interest in what scared people.
People are scared of three things …dying, losing their income through ill-health and living too long.
Shortly afterwards I became a financial adviser. Because I didn’t know anyone in London , I worked for the first two years knocking on doors and meeting people in Oxford Street with a clipboard. I hardly spoke to anyone who had wealth.
The job was about getting people to sit down and confront the “three financial elephants” that sat in the back of their consciousness. We used primitive psychology known as “disturbance”. We told the widow’s story and other tales of woe that got people to relate to the plight of the long-term sick and the elderly.
This type of financial advice is seldom talked about these days. I guess the welfare state provides greater security than it did in those days but the majority of IFAs I meet these days talk to me about Enterprise Investment Schemes, SIPPs and offshore trusts.
I can see why, it’s hard to make a living selling £5 per month term assurance plans. Most employed people have life and income protection through work and those in self-employment can buy protection on the web. Those who have little or no pension are unlikely to benefit from personal pensions, the outcomes of which will do little to improve net income in retirement.
As my career progressed I started to advise small and medium-sized companies on how to provide meaningful retirement benefits to staff. As I moved up this food chain, my link with the “three financial elephants” became more tenuous. Today, I do little face to face work with the members of pension schemes. I attend seminars where we discuss NEST and its impact on the pension poor, I consider de-risking strategies for derelict occupational pensions and grapple with abstract investment concepts designed to keep the sponsors of these schemes solvent.
On Wednesday afternoon I sat down with a group of IFAs who gave me a wake up call. We talked about meeting members of the schemes we run to discuss with them the financial elephants “how long they expected to live” ,”what would happen if they took a higher pension in exchange for no pension increases”, “whether it was better to have cash today or income tomorrow”, “what you could realistically expect from a DC plan”.
These were people who had never lost sight of the financial elephants that people face, they talked as if these problems were their problems, expressing a passion for the dilemmas the hard financial decisions their clients were being asked to take. They also recognised the needs of sponsors to offload pension liabilities and the impact the schemes they worked on could have on the livelihoods of their clients.
These guys won’t be front-page news, don’t expect Goldman Sachs to be hiring them tomorrow. They are part of a small but dedicated group of pension professionals who are making an immense difference through hard work, high ethical standards and by telling people how it is.
I take my hat off to them.