I had some time yesterday to read up on two documents about advice and guidance. The first was an article by John Lappin in Corporate Adviser, explaining the need in the workplace for more help for people navigating the dangerous waters as they try to move from saving to spending their savings.

The second is a report produced by the International Longevity Centre and presented yesterday to the PFS conference by Steve Webb. This report , demonstrates in financial terms how much better the average person would have been taking advice over the first two decades of the millenium – than going it alone. The answer is on average £47k and the report shows that the less affluent would have been disproportionately better off than the affluent – by taking advice.

Some people, including my friend John Mather who put me on to this report, will be surprised that I agree with both John Lappin and with the ILC

Here are the results of the ILC report itself

The aggregated finding are in the bottom three rows and I have no doubt that the key conclusions are right.

• Receiving professional financial advice between 2001 and 2006 resulted in a total boost to wealth (in pensions and financial assets) of £47,706 in 2014/16.

• The benefits of financial advice are potentially greater for those we term “just getting by” than for those we consider “affluent”: the former would have seen a a 24% boost to their pension wealth compared to 11% for more affluent groups (those most likely to be advised).

• Evidence also suggests that fostering an ongoing relationship with a financial advisor leads to better financial outcomes. Those who reported receiving advice at both time points in our analysis had nearly 50% higher average pension wealth than those only advised at the start

Which begs the question , why isn’t advice more generally available to the less affluent. The answer to that question is dealt with John Lappin’s article.

Steve Bee, making a welcome return to talking about financial services (since his firm’s acquisition) is clear that the employer has a key role – especially when they can put mobile technology into play

The best place for employees to find out this stuff is through their employer. Whether they’re actively involved or not, they still need to be the hub. I always thought the Money Advice Service in the early days should have been planted on every pension scheme’s website.

“Employers can do a load of this stuff because everyone’s got a computer in their pocket these days. You can make financial capability tools, simple ones, and even quite complicated ones available to everybody. It’s the next step for pension schemes.” Bee points out that the larger schemes have always done this sort of communication.

Tom McPhail believes the FCA and tPR can help too.

“I think it is now about finding a regulatory framework that enables firms to do more of the guidance stuff. There is a guidance gap not an advice gap.”

Synthesis

You might be slightly confused at this point by the differences in approach of those who see the benefit of advice and those arguing for guidance in the workplace.

I am here to provide some Kantian synthesis in typically cod fashion.

The problem with advice is delivery, it is not deliverable in bulk for all the reasons we know

1. over-engineered fact-finds
2. cost of regulation
3. advisory business models
4. lack of human resource

We also know that guidance is potentially deliverable in bulk for all the reasons we know

1. mass distributors (employers, insurers and trustees)
2. workplace pensions
3. technology
4. lighter touch legislation

The synthesis is simple. Guidance is the ante-chamber for Advice. Many could benefit from guidance and choose to enter the temple of the holy of holies – where sits the IFA on his gilded throne.

But even those who do not enter into the inner sanctum will get the benefits of guidance, leading them to take exactly the decisions that the ILC see as making all the difference.

Alternative thrones are available