Why can’t we talk about money without paying for advice?

 

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Iona Bain has been travelling around Britain finding out what young people are doing to get help with their finances. She has documented her findings in a great FT article

Shunned by traditional advisers, younger investors use apps and digital platforms

Her travels take her to the usual suspects – Nutmeg, Multiply and MoneyBox though – like any grand tour – there are sites that are missed – MoneyHub, E-vestor and PensionBee (for three). The article is not supposed to be a directory.

I have a few complimentary copies of the article I can share to those who do not subscribe to the FT – mail henry@agewage.com if you want one.


The A-word and how it’s been

Advice has become a commodity and an expensive one. It’s the caviar to the cod’s roe of guidance, it’s so precious that it is only given to those who can pay for it, through a clip on their wealth. Advice is what millenials want and can’t get – because they aren’t (yet) wealthy.

If you are wanting to pay for a financial adviser, and plenty of us should, then follow the advice in this blog by Paul Lewis. But remember, the fact that you clicked the link makes you a rare (and probably privileged) breed.

At times Iona’s article hints that IFAs are being short-sighted, not focussing on a cradle to grave advisory service. But it concludes that IFAs can afford to wait till the wealth has cascaded before engaging with the young. Advice is a minority sport – like fox-hunting – there will always be demand from the entitled.

But if it’s true, (as suggested by recent research from Drewberry) , that only 6% of people want to pay for advice from a clip on their liquid assets, why does the Ad Valorem model (which collects advisory fees as a clip on liquid assets, prove so popular?

Iona Bain’s article cleverly avoids answering these questions. Instead she feeds back using twitter, the responses to the article.

The harsh conclusion is not that people don’t just want an end to valorem charging, they want an end to advisory-charging. That is a much greater issue for regulators, than protecting the livelihoods of IFAs – who are proving more than capable of looking after themselves.


The Burn-Out generation

My son – who is a generation younger than Iona, seldom answers my inane senior questions verbally.

olly

Olly Tapper

He sends me a link to the answer on one of around ten messaging systems he employs (and I slavishly sign up to). These include Slack, Whatsapp, Facebook Messenger, Twitter DM as well as  and SMS. He has reluctantly signed into LinkedIn (the old folks home) and even messages me on that. E-mail is a work app, but only one of many

The answer to just about everything is downloadable and app management is now essential to avoid  “errand paralysis” . 

In a great article on Buzzfeed (linked above),Anne Petersen points out that Iona’s  is the “burn-out generation” where existence is reduced to “to do”lists organised digitally but never quite completed.

Reading the article – I realised that what has changed is dependency, young people are now dependent on the ready availability of answers to questions from the web.

What they are not getting is ready answers to their financial questions, and especially their questions about pensions. Ask social media what to do with your financial problem and you get referred to a financial adviser.

lottie

Lottie Meggitt

I heard the same frustration from another Millennial – Lottie Meggitt – at a recent pensions event.  She more or less accused my generation of not handing down to hers the keys to the secrets we hide in our black boxes.

This ever-present fear that millennials have of not being able to manage for themselves is exacerbated by a financial advisory industry that refuses to play ball. Lottie and Iona’s frustration is not just with the complexity, but with their inability to cut through it. We are in danger of burning-out their patience.


I get this – though I am not sure I am the answer

Actually that’s not true, I am quite sure that I can be part of the answer, though I need Iona and Lottie and Olly to deliver it.

The best that my generation can do is to pass down answers to their questions which they can deliver intelligibly to those around them.

Attempts by baby-boomers to deliver solutions to millenials are doomed to failure. We can only follow.

The first thing we must learn is that the vast majority of financial advice  should be and remain free. The calamity of putting advice behind a firewall and charging for it is that we have alienated more than 9  in 10 people for asking for it.

“I can’t give you advice” is one of the great lies. Anyone can give advice, the question is whether it is worth listening to, not worth paying for. What financial advisers have done is created a means to monetise advice which I and my generation whole-heartedly endorse. We are in fact trying to make ourselves relevant, but we are lying when we do so.

“I can give you advice, but I don’t have time”, would be a more honest answer.

“I can give you advice – follow this link” is the answer my son gives me.


Will the  market find an answer?

Financial services has been slow to answer the need people have to get their questions answered digitally. It’s just not created the way to deliver the answers which are out there.

But the answers to our questions can be found , if only we know how to frame those questions and have confidence in the search process itself.

The encouragement for the market is that the opportunity is out there. The investment of time and energy in delivering the digital advisory services needed requires patient capital and a confidence among investors and entrepreneurs that where trust is gained, reward will follow.

The question is not how but when. I suspect the answer to this question lies with the Regulators. I have the opportunity to speak in a few weeks with the Chair of the FCA and I will be putting this issue at the top of my agenda.

I think it is critical that Government moves with the times and understands the issues raised in Iona’s article. We need to allow people to get straight answers to their questions without the complications of products and product related fees.

We need advice to become free again and for its delivery to be trusted. Pensions Experts  should not be afraid of the A-word but aspire to be trusted advisers (if only through the digital delivery mechanisms created by younger generations).

The answer to the questions raised by the Financial Advice Market Review and by the Retirement Outcomes consultations will not be found in the past but in the present. The questions are being asked by the millenials – which is why Iona’s article is so valuable.

Iona Bain

Iona Bain

 

 

 

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in advice gap, age wage, pensions and tagged , , , , , , . Bookmark the permalink.

10 Responses to Why can’t we talk about money without paying for advice?

  1. John Mather says:

    Answer Regulation and a culture of no blame at the
    door of the consumer.

    A reluctance of advisers who know
    what they are doing from giving advice in areas where
    regulation is with hignsight

    A reluctance to be an adviser at all

    Gone are the days of the paternalistic
    employer unless you are on the board.

    Economically an assumption that
    Living standards will increase without increased productivity

    Lack of numeracy and an appreciation of the contribution of time

    Conversion of the stock market to a casino

    I would love to see a table of outcomes over the last 20 years with
    advice and without to see if advice has any impact over a random walk

  2. Caitlin Loynd says:

    The need for advice has been driven by the absurd hoarding of wealth by some, though not all, of babyboomer generation, who accumulated more than they need, but don’t want to give it away either through taxation, charity or the next generation. And they are willing to pay people like me to tell them how to preserve it.

    This is a scorched Earth approach but one endorsed by the policies of Reagan, Thatcher and neoliberalism. Rather than wealth hiarding being solely the preserve of the elite landowners it is now within everyone’s reach. Indeed saving and investing now seem to be key for all.

    The obvious solution to eliminate the “mass affluent advice business” is the radical distribution of wealth eliminating the need for advice or inequitable distribution between classes and generations. Alas, not a solution that today’s ruling classes or capitalist devotees will ever willingly endorse. And so the “need” for advice and its monetisation will continue.

    • DC says:

      “The obvious solution to eliminate the “mass affluent advice business” is the radical distribution of wealth eliminating the need for advice or inequitable distribution between classes and generations.”

      That would be ONE solution, not THE solution. And it would be an incredibly short-sighted Marxist solution.

      Not sure if you are trolling as this could be one of the stupidest things I’ve heard from someone who’s very livelihood depends on siphoning charges from the very people you would (presumably) rather see surrender that wealth for no reason.If you are trolling then well played, you got me.

      We will never have ‘true’ equity of outcome because although Western society strives for equality of opportunities, dominance is not determined solely by opportunity.

      We can’t avoid wanting to be dominant as it predicates survival, or in less extreme situations, being able to provide security for loved ones and people we care about.

      Only a small fraction possess the timing, luck, savviness etc to become truly dominant and if applied to careers this typically manifests itself in accruing wealth, influence etc. at an exponentially faster rate than others.

      It’s always interesting to hear what people think would happen should this wealth redistribution be realised, as if this would happen in a bubble and we would live in a utopia forever after.

  3. Brian G says:

    Regulated advice can’t be free and should not be free. The 6 per cent who take regulated advice do and should always pay for it. And if they no longer want regulated regulated advice then they should stop paying for it. Regulated advisers are unlikely to express opinions or give free advice away in a litigious society where people can sue them and win even when the advice is pro bono. So I assume your blog instead refers to the need for non regulated advice to be free. It already is free. Trouble is the kind of crap advice that amateur commentators peddle is often unhelpful. If regulation allowed generic financial planning tips and hints to be given then who do you propose would give it? And how would you stop unregulated advisors getting British Steel workers to invest in high risk high charging investments which lead to massive losses? Even well meaning intelligent journalists often talk crap and write articles that, if followed by the reader, would mean they only ever invest in cash. And people who used to be financial advisers fail to understand how thr FCA regulations now make it very difficult to offer anything more than guidance and they often seem to thoroughly underestimate how helpful it can be to receive well delivered tailored guidance.

  4. Robert says:

    In the future, I think that paying for financial advice will become a thing of the past . You can already see that rather than paying extortionate advisory fees, many people (especially the younger generation) are now doing their own research in this area. This is due to the amount of information available online etc.

    I have recently enquired about my own finances and have to say that even though I can afford it, the thought of paying four or five figure sums for financial advice is quite off-putting……..no wonder the average annual salary of the UK’s financial advisers is approximately £92,0000!

    As you have the opportunity to speak with the Chair of the FCA in a few weeks time, could you mention on behalf of myself and thousands of other British Steel Pension (BSPS2) members, that we are totally against any claims against the Scheme Trustee arising from members who transferred out of the scheme on the recommendation of their financial adviser.

    • Brian G says:

      Paying for advice won’t become a thing of the past. What will happen, and has already happened is that people will increasingly pay for ongoing financial planning rather than only paying for transactional advice. If the FCA ever realise that there is a middle ground then with more enlightened regulators it may be that less holistic advice can be offered at a lower cost.

  5. JHA says:

    When is anything, particularly if it relates to an investment “free”? Free banking! Please wake up and smell the coffee and stop peddling the need to get something for free. Honour the value of actually providing a service, respect the considerable time advisers have spent gaining qualifications and professionalism, and get a grip of the fantastic benefits which can be gained by engaging with a person who really can build solutions for issues which are fundamentally ignored by a population who “expects to get this for free”!

    • Robert says:

      I always honour and respect something that provides good value!

      In my experience with reputable IFA’S regarding whether or not I should transfer out of a defined benefit scheme, there was no value whatsoever! In fact it was quite the opposite as they recommended that I transfer out which certainly wasn’t in my best interests!

      I’m very glad that I didn’t follow their advice!

      I would say this is more of a case of putting themselves first and lining their own pockets!

      I know there are good IFA’s out there who are very honest, but from what I have seen so far they are few and far between!

  6. JHA says:

    This has always made a lot of sense to me:

    “Common Law of Business Balance”.

    “It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot — it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”

    • Robert says:

      If you are referring to the IFA’s I spoke to regarding my DB pension transfer as the ‘lowest bidders’, I can assure you they were not. They are reputable IFA’s who are chartered and certified financial planners!

      As the saying goes………

      “Integrity is choosing your thoughts and actions based on values rather than personal gain”.

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