Financial advisors need better retirement products


Better products that deliver what they say

I had the pleasure of Chris Radford’s company over the weekend. Chris is a consultant to pension providers , a regular at our Pension lunches and someone who thinks about the way ordinary people buy things.

I’ve recommended him to get on the panel of experts who will conduct the “Financial Advice Market Review”.

Our conversations come back to the missing ingredient in the adviser’s soup – the product. Chris argues that we need fewer but better products that deliver what they say.

Certain delivery

This idea of “certain delivery” is critical. The sofa you order this month for Christmas is not the sofa that arrives two months later in February, it is a Christmas sofa. If it doesn’t turn up then it’s a rip-off.

We want products that deliver the right money , in the right way , at the right time. That’s all that products do – shift money over time. The recently conducted survey of 2000 individuals that showed a preference for paying tax now in return for certain tax treatment in the future, shows which way the Government should be heading,

But certainty is only half the story, the certainty of failure – or at least of disappointment against expectations, was what prompted the lifting of the rules around annuity purchase.

“From this moment on nobody will have to buy an annuity”

Advice is judged by outcomes

The difficulty, financial advisers find themselves in , is not about the cost of advice, but justifying the cost of advice in terms of outcomes.

Here are some numbers from the Daily Mail study into why people retiring don’t want to take financial advice

Daily MailThe startling thing is that  almost every comment (typically 1.5 comments per person) relates to value for money.

We know that value for money is an equation that people make between the cost of something – and what they get. Discount the small number of people intimidated by financial advisors and the public is saying they do not get a product that justifies the price.

The result is that only a few of those spoken to , either have or intend to get advice when they access their retirement savings.

Mail 2The most important part of the article is the ‘vox pop” of comments (125 of them when last I look). I would strongly advise those running the Financial Advice Market Review, to read every one.

Though many are pusillanimous, they add up to a powerful statement, the statement is that the outcomes of the advice do not justify the cost.

I was told I had to get financial advice before I could transfer to income drawdown. I know what I want to do with MY money so I told them to get lost. Still waiting and will take the matter to the Financial Ombudsman if necessary. (speakwithsharptongue)

and again

For financial advice see financial sales, without any real concern for what happens after (general Harry Flashman)

and again

The problem with Financial Advisors is they gamble with your money, charge you 10% for the privilege of doing so, sometimes say sorry if things go wrong but often tell you they did warn you of the risks involved!! (Bread Man)

and again

After decades of being scammed by insurance companies, pension companies and banks, one can be forgiven for being reticent to trust some 25 year old advising how you can ‘guarantee’ a fantastic retirement beyond your wildest dreams. (gasman)

(I have selected comments that have the most endorsements).

If the advice leads nowhere, then people feel they are better off on their own. The Daily Mail tells its readers to take advice but the vast bulk of the comments are of the kind I have selected.

What is most worrying for advisers, is that many of those commenting are thinking of advice in terms of what happened to their endowments and other “legacy” products.

Simply repeating the advisory process for today’s retirement products, repeats the (negative) experience of the customers). I suspect that the way that advice is delivered will become one focus of the review .

Better products – not more advice.

But even more important for the Review is to understand where the advice is leading to. We may re-invent the advisory process, but if it leads to products with the same systemic issues, all that has changed is the shop window.

As the first comment about Income Drawdown, points out, if the product requires advice and the outcome of the advice is seen to be a poorer product, people will get nasty (go to FOS).

To the public, the products that people buy with their retirement savings either offer rip-off rates (annuities) or rip-off charges (income drawdown). In the public’s mind, these rip-offs are associated with the intermediary salesmen.

The last word should go to the top-commentator (in terms of endorsements) – Frank Howorth

As a retired business man I think I could give many of them better advice than they could give me !!!!!!

This hostility is not reasoned or reasonable, it comes from the frustration of people who are told  to go to advisers but are frustrated by the outcomes of that advice.

The problem is in the product and we have to get a better retirement income product into circulation than those currently on show.

I will be arguing to the Financial Advice Market Review for better product. If you don’t know what I mean, press here.

piggy bank

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Financial advisors need better retirement products

  1. John Trayner says:

    good article. The general public tend to behave like stroppy teenagers. A 16 year old doesn’t want to be told what to do by mum and dad but when things go wrong they are on the phone wading for help.

    That said I would agree with the comment that advice = sales for many consumers. Part of the problem is that the regulator insists that giving advice means giving a recommendation which is all very well but with pensions the big unknown is how long you will live. So the only honest answer to the question “what should I do?” Is “I can’t tell you that but what I can do is help you make an informed decision” Once the customer makes the decision the adviser should then help them execute this

    Final thought. I’d be willing to put serious money on the Mail running a piece in 10 years time about destitute 70 year olds who spent all their pension money and are pleading “why didn’t anyone stop us and we should get compensation”

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