As students protested outside, Danny Cox and I sat down to a club sandwich at the National Liberal Club. Danny is Head of Advice at Hargreaves Lansdowne and my question was how he defined advice.
I was expecting a long explanation of process, instead I got one word,
Danny explained to me that the majority of his clients were aware of what they wanted and had a pretty good idea of what they needed to do, Hargreaves Lansdowne deal with people who are financially literate.
The majority of their clients do not need advice and Hargreaves encourages its clients to take decisions on an “execution only” basis, giving them the information to take these decisions in a digestible way.
Those who need advice are typically looking for validation of a course of action they have worked out for themself.
Leadership for Danny and his colleagues was the process of confirming and refining this course of action.
Danny, like me, started his financial career selling life policies, a tough world that involved spending large amounts of time being told to go away (in not such polite terms).
I wanted to know whether his approach transferred to people who didn’t have the wherewithal to work things out for themselves – whether this concept of validation could be applied universally.
My conclusion is that it can’t. This is not a class statement, whether in organising wealth ,household budgets or managing benefit claims , there are people who can and wish to act independently, those who are willing but need leadership and a great bulk of people who simply need to be told what to do.
We have a very small number of people who are skilled financial advisers. Increasingly they are focussing their attention on areas where wealth is concentrated those with High Net Worth. The Wealth Management business is lucrative because it is supported by the wealth on which advice is given. Here financial advisers are effectively given discretionary powers to make sure tax is minimised, volatility reduced and growth and income maximised.
For the mass affluent, the kind of advice that Danny advocates is needed by those who feel insufficiently confident to take decisions without guidance, validation and occasional instruction.
But with limited advisory capacity , can the vast majority of the population expect even the level of support that Danny provides his customers? The Retail Distribution Review , the introduction of auto-enrolment and the various pronouncements from the Pension Regulator and the FSA that we have seen in the past few weeks suggest that the Government’s policy has been shaped by a realisation that where there is insufficient capacity and insufficient means to pay for high quality advice, the leadership role must be assumed by employers and ultimately by Government itself.
Behind this realisation is a fundamental shift in policy. The social contract, as defined by Beveridge and successive Governments could briefly be described as “the State will provide”. At it’s most extreme, the position of many right-wing thinkers that have developed since the Thatcher years is that the State should withdraw and leave people to manage their own affairs. Both these political positions assume that a dogmatic approach can shape the behaviours of the people and both have been exposed as we recognise that we neither have a State Welfare System that is fit for purpose nor a population able to fend for themselves.
I’m struck by Danny’s simple idea about Leadership. His firm has recognises the need among some people for their decisions to be validated while expecting the bulk of their clients to act independently.
Across our society we are moving to a place where the majority of Companies are going to take independent decisions on what they need to do about pensions while the Government are going to confirm a course of action for Companies needing that helping hand.
This mirrors the advisory model installed by Hargreaves Lansdowne. Those on the left will argue that this is not an inclusive model – there will be the opportunity to opt-out of what is going on and it is still unclear how the Safety Net for those who can’t or won’t provide for themselves will work.
Those on the right will criticise the level of Government involvement through auto-enrolment, Regulatory interference and most especially the introduction of auto-enrolment as an affront to free-market economics.
However, I believe the balance that is currently being achieved, relying as it does on firm and clear Government policy and a recognition of the differing needs of Companies and the people they employ, demonstrates that the Government has finally found a way forward.
- Next Generation Leaders expose “Politics As Usual” In Chicago “Consensus” Candidate Selection Process (chicagonow.com)
- Small business hit by “extortionate costs” of pension enrollment (telegraph.co.uk)
- 9. Defining moments of the Thatcher years | Gulf War advice to Bush | 3 August 1990 (newstatesman.com)
- What Everyone Should Know About Financial Advisors (money.usnews.com)
- Britons ‘won’t buy financial help’ (mirror.co.uk)