The FCA says it has found precious little evidence of innovation from its Retirement Outcome Review. I am not surprised, judging by the people who it invites to its “workshops”, it is looking in the wrong places. It is necessary to talk to entrepreneurs like Romi Savova of Pensions Bee and Anthony Morrow of Evestor if you want innovation. Neither was at the workshop, they should have been.
Last week, I was in a stern meeting with NEST’s COO and Romi Savova where Romi agree to help NEST to re-think its current strategy to transfers-out ( which take on average 49 days).
Yesterday, Anthony Morrow wrote me a request to contribute to the debate which he did on my blog – advising the 5000. Here is that comment.
As you know Henry, I share your frustrations and anger at the Industry’s continued refusal to create a solution to the “advice gap”. I choose the word “refusal” carefully because that is what it is. There are no regulatory or operational reasons why providers and/or advisory businesses cannot deliver a proposition that would provide financial advice to all members of the public regardless of age or wealth.
There are only commercial reasons and to suggest otherwise is wildly disingenuous.
The lobbying for the FCA to introduce a new category terms “guidance” is essentially the Industry saying, “we want to manage their money but we don’t want to have to take on any risk of providing them with advice – do something about it and give us a safe harbour.” That is why we are seeing so many non-advised solutions coming on board apparently to satisfy customer demand because people don’t want advice.
I have no idea how these surveys are carried out and the questions framed but the idea of people with little wealth and experience choosing to turn down the offer of advice so that they can make their own decisions is fanciful. Rather they do not want to pay the fees that are quoted now for that advice. That is a very different question.
I cannot think of one scenario where I, as the lay person, would turn down advice from an expert so that I could make my own decisions based on the content of a few website pages regardless of how shiny they were or beautiful they looked in an App. It is as ridiculous as it is irresponsible to think that.
In fact the subject of retirement option is so complex that the Industry deems it necessary to create an advanced examination on the subject for those advisers who are active in this area to take. Yet somehow we seem to think a large swathe of the public, many of whom are being faced, in the example of D transfers, with sums far greater than possibly their entire asset base, can make these decisions on their own.
The problem is that we are too used to feasting on rich pickings of fat margins and too chastened by past experiences of mis-selling to want anything different.
How many firms who say that it is unviable to deliver a service to the mass-market have actually tried to build one? Is it not that to deliver this service, addressing the very real concerns about the level of fees, would mean they would have to make less money than the status-quo and therefore why bother?
When me and Duncan started the concept of evestor almost two years ago we only had two clear objectives:
Widen the availability of financial advice to everyone regardless of age and wealth
Lower the cost of financial advice to make it affordable for everyone
In the 3 months we have been launched we have achieved that with a client base that ranges from 18 to 81 and investments from £5 per month to over £100,000.
We have provided through the system over 1,000 recommendations of which over 70% were not to invest either because of debt levels, lack of rainy day funds or no capacity for loss. The incremental cost of those recommendations in negligible beyond the R&D of the build itself and the maintenance. Arguments contingent charging are predicated on being unable to manage conflicts of interest and also ignore totally how else those with more modest means should receive advice.
Our access to humans via webchat or through qualified adviser virtual meetings have made a massive difference in the customer experience as it provides customers with a level of comfort and validation to make those decisions. As your article notes there are some areas of finance that are very difficult to articulate completely to the lay person via digital-only medium. Our hybrid approach deals with this.
We have concentrated on accumulation only at the moment but will be launching a decumulation service very shortly including DB transfers which we will be bringing in within the same pricing model as our standard model e.g. no initial fee and a total ongoing cost of less than 50bps. We can do this because we have very efficient systems and realistic expectation on long-term profitability.
There are no doubts in my mind that the 5,000 can be fed but first we have to want to feed them.
Yesterday was also notable for the publication of a very radical blog from Paul Lewis
— Paul Lewis (@paullewismoney) September 18, 2017
Like Anthony, Paul is fed up with the hi-jacking of the “advice-word” by Financial Advisers who are monetizing it to the exclusion of those who cannot or will not pay a premium for conviction.
There is of course “advice” in both the Money Advice Service and the Pensions Advisory Service. As Michelle Cracknell, CEO of the latter commented to me after reading Paul’s article, the debate is not about a “real world problem”. She’s published an excellent pamphlet “Advice and Guidance – recognising the difference” – as part of TPAS’ Insight Fact File series.
This is getting to the nub of the problem. To innovate, we need to take a step back as Romi, Anthony, Paul and Michelle are all doing and ground their thinking in what people need “in the real world”.
So many of the problems that the FCA identify, including the hang-up about advice and guidance , disappear in the real world in which we live our lives, save our money and plan our retirements.
Re-connecting with the real world means looking in places that the FCA are not currently looking, it does not get a mention at Retirement Outcome Workshops, as I found out to my great frustration!