The quote in the title comes from a friend of mine, who has a successful web-based comparison site (that doesn’t compare pensions). The comment has haunted me since Christmas.
What’s that coming over the hill?!?
uh- “guidance”…
uh – “single guidance body”
The Financial Guidance Bill is making its way through parliament.
If Government were following the rules of business, it would have scrapped the central construct of the new legislation, the single guidance body. Instead the amendments listed here support the inexorable progress of this quango, the lovechild of the Money Advice Service and Pension Wise.
Pension Wise has not been a success. Infact it has been a failure. If it was proof of concept for the single guidance body, it has shown that the concepts of financial guidance, advice and education are no closer to being grasped by the general public than they were by the Chancellor in his budget speech of 2014.
We are in danger of quarantining the phrase “financial advice”, in a place where only highly qualified financial advisers can go. If we define “financial advice” , as the Pension Advisory Service does, as the provision of a definitive course of action, then you’re not going to get “it” unless you sign a terms of business and pay money for it. Financial advisers would say this is as it should be. Their lobby has effectively created a monopoly on “telling people what to do”. But of course you cannot quarantine something as amorphous as “advice” and as there are financial implications to most things we do, the quarantining of financial advice will be as helpful as nailing water to a wall.
The single “guidance” body had, at one times, designs on requiring us to all be subject to a “sheep dip” known as a “mid-life financial MOT”. The idea was, that rather than the voluntary guidance available from Pension Wise, we would be forced to pay attention, at least for forty minutes, to our long-term finances. Not since the introduction of compulsory education in schools, has such an ambitious program been proposed. Unsurprisingly, the idea appears to have reached its high-water mark.
So what is emerging is a very insubstantial Bill with the feel about it of fairground crab-thrapping. Whacking a crab (or mole) is hugely satisfying to the thrapper, but crabs and moles abound and the faster you hit them, the more they reappear, You can be a champion thrapper, but the crabs and moles survive to carry out their pernicious practices once you have left the stall.
The amendments are principally around pension cold-calling, which will be banned (at least from within the UK) from as early as the summer. This is a victory for good sense, though it will hardly leave the scammers exposed. Already, lead generators are hard at work creating pension enquiries from online activities that lead us to leaving our telephone numbers in a data capture device. My guess is that these “hot leads”, self-generated” will solicit a phone call which will be “warm” enough.
It is very hard to see us preventing scamming by suppressing supply. The best way to suppress scamming is to improve the supply of relevant help for people.
The absence of “help” on pensions is very evident to the general public.
If you go to “Go Compare” or “Compare the Market” of “Money Supermarket”, you will be able to get your car insured, your life insured, sort out short term savings, find out about mortgages, compare credit cards – do all kind of useful financial tasks.
But you will not be able to find out about your pensions.
Even Martin Lewis is silent on pensions. I’ve been going to MoneySavingExpert for 10 years now and I have never seen so little stuff on pensions on the site. Not one of the headline services is talking about retirement, retirement saving – the word pension seems to be taboo.
The sad truth is that none of the great comparison websites that are so crucial to our financial decision making, has a pensions business.
Talk to the people who run these sites and they are not happy about this. They would like people to come to their sites and transact. But they find it very difficult to help.
Over the next few months, I will be exploring why this is. I want to know what is stopping people taking decisions on what to save, where to save and how to spend their savings, without recourse to advice or government guidance or a financial education program.
I want to know why everyone thinks its so easy to press a button marked “transact” for credit cards, ISAs , loans and insurance but why pensions remains “out of bounds”.
I want to know why telling someone what to do is a “quarantined” action and how people can by-pass advice and do things for themselves without risk of being bitten by some rabid scammer.
I want to know why people can’t manage their financial affairs in retirement without being considered “Lamborghini” feckless or recklessly conservative.
We should not give up on providing people with a definitive course of action.
As well as reading the amendments to the Pension Bill, I also had the time to read an article in Pensions Expert which contained this interesting thought.
When the Department for Work and Pensions allowed the industry to block mastertrust Nest from entering the drawdown market in 2017, it did so with a proviso; the industry had to drive innovation itself.
The “reassurances” offered to policymakers were such that the DWP expressed “hope that development of new products will progress at pace now that the freedom and choice reforms are well established”.
One year on, and some politicians are questioning whether the collection of competing mastertrusts and insurers have earned their respite from what they had labelled market distortion
Politicians I speak to are as frustrated as the general public that there is no “obvious thing to do” – no definitive course of action.
For the public to be satisfied, they need to be able to get to grips with pensions as they can do with any other financial matter.
This country has one of the great internet buying cultures of the world, according to Wake up to Money this morning, 17% of all shopping now happens on-line. And yet , outside of the workplace, nothing “pension-wise” is happening at all.
It really is time we started putting to people default solutions that make simple sense. Innovation is needed and innovation is happening, talk to the 145,000 Royal Mail postal workers.
Origo has reduced the processing time of transfers from 50 days to 12 days, there are opportunities to go further.
Innovative new aggregators are coming into the market and talking about ways of looking at products using value for money scoring to compare “apples” with “pears”.
In short, the Financial Guidance Bill is a hopeless irrelevance that simply treads water. The single guidance body will be a flop, as Pensions Wise was a flop. People don’t get guidance, they want advice and they want to be told what to do by people like Martin Lewis who they trust.
They can’t get what they want right now and they are rightly frustrated (as are the politicians).
This all adds up to this being a time of opportunity, for someone to take a lead and deliver what people really want – a definitive course of action – being told what to do!
Thanks for that Henry. Thoughtful and thought-provoking as ever.
I couldn’t agree more on the guidance versus advice debate.
As a long-term member of corporate pension committees, I can attest to people being desperate to be told what to do. Yet at the same time they are deeply distrustful of an industry which constantly confounds attempts to rid itself of a reputation for bad apples and a lack of transparency.
The regulator, the FCA, is as culpable. It does little or nothing to help the general public, those to whom guidance and advice are linguistically equivalent, distinguish between tied and independent advice. Thus they are left at the mercy of FTSE 100-listed “advisers”, their opaque fees and questionably-suitable products.
I must declare an interest. I have made a cottage industry from hosting small sessions for those confused by the jargon or refugees from advisers. The idea is to show people how things work to enable them to make their own decisions. We spend time on the low-hanging fruit, such as making sure people appreciate what a great deal the state pension is and how to invest without the fat initial charges.
People only come to me by referral and I don’t advertise, so this isn’t a plug. Initially I felt defensive about not being an IFA, but to be honest it’s actually a major selling point not being part of the industry and being prepared to spend time explaining how things fit together without bamboozling. I’m even enthusiastic about providing “guidance” on services, such as PensionWise, which provide free advice.
I’m not sure I necessarily lend myself to being a comparison platform, but I agree that trust and reputation are far more important than arcane distinctions between guidance and advice.
Stuart,
Totally agree.
Building a retirement income strategy is akin to constructing a self build home. It is your own design to meet your living needs but there are constraints on your budget, and regulations to be complied with. A retirement income strategy has to adapt to who you are, what wealth you have and what your spending will be.
You cannot tell someone what they can do unless they have an understanding of those 3 aspects. Unfortunately everyone is different.
Note I said what they can do, not what they should do. It’s their retirement.
To build a retirement income strategy with just pensions; leads to a pretty boring retirement. In a modern retirement, employment income is becoming more important, and many retirees have a lot more wealth in their house than their pension. How you use these materials alongside your state pension is what retirement dreams are made of and what you worked for.
If you build a house with only bricks and little glass to let the light in is it going to be a home or a box to live in. In the retirement analogy, if you depend solely on your pensions, you may have a boring retirement.
Where does one go to get help to design the retirement of your dreams? Where does one go if you want to self build to understand the materials available to you, how best to use them and where to get the best value? There is very little help and information out there for do it yourselfers.
Maybe this is the problem, we as an industry are too focused on the product not the dreams of our consumers.
Thought provoking but somewhat naïve Henry.
The history of personal pensions in the UK stems from producers giving advice (in conjunction with the product – commission), then producers waiving any profit from advice by simply offering the product and ‘guidance’ on the technical functions of the product.
The simple reason is that advice is massively less profitable than the underlying investment strategies (on a large scale).
Pensions are regulated (in part) to provide a code of ethics and protection to both consumers AND advisers.
For as much as there have been pension scandals in the past, there have been significantly more cases of people outspending their resources and making terrible decisions on their own.
Subprime mortgages didn’t collapse on their own, their has to be a lender prepared to take the risk AND a terrible credit rating on the other side…
The bottom line is that no-one is prepared to offer anything above guidance for free because there is almost endless risk for no return.
Reading these great comments, I feel more strongly than ever that we must find a way of creating financial gravity that allows money to flow into the right pots. We need trusted comparators, i suspect we need value for money numbers for everything!