OUCH!
I am working out if I need advice or guidance. I conclude I need help. But there is no help- there is a “help-gap”.
There is a help gap because we have created one by making the business of saving for and spending far too complicated.
This has led to people pressing the “submit” button for services that they never thought they’d need. To take a few at random
- A decision to design your own investment strategy to power your pension in later life
- The creation of a later life cashflow plan in your forties (the mid-life MOT)
- The decisions on whether and how to employ a financial adviser to manage your accumulated pension wealth.
- For those who choose not to, the choice of investment pathways
- The ongoing struggle whether to spend the pot or save it for the next generation
- The ongoing decision on how the pots and pensions interact with benefits and especially later life healthcare.
The welfare state has turned into something quite different, a state of affairs where we are being asked to take decisions that baffle actuaries, investment managers and financial planners.
The help-gap
The FCA have Christened this phrase to put an end to the endless debate around the advice/guidance perimeter. They are right to do so. People do not want to be involved through interminable disclosures that what they are getting is either guidance or advice, they want help.
They want help on investment, on tax, on protecting their family , on the costs of later life and some want help so that the really tough decisions – like swapping a pot for a pension, can be taken for them.
They want help that they can trust from people who are acting in their interests and they want to know how they pay for this help.
A different way to pay for help
Their payment model is not aligned with that of the advice industry’s. Most people do not want to pay a subscription for advice via an adviser charge linked to their pot. They would much rather pay at the point of use and return to advisers at points in the future, as they would do solicitors or other professionals.
The subscription service is a construct of the venture capital/private equity industry which increasingly owns financial advisers and demands a financial model which gives an annuity value to the businesses they own.
The project based fee model is simply not available – as I have found. You either become a client and allow the adviser a charge on your assets, or you get no help. This leads to years where no help is needed but help is charged for. This is not how the consumer duty works.
An instruction manual
The alternative to employing an adviser is to learn to do it yourself through an instruction manual. We drive a car out of the showroom with a minimum of advice on how to use the complex features cars give us. We learn how these work through trial and error and with reference to manuals or on-line teaching tools.
Increasingly, the pensions industry is moving towards this kind of learning, albeit with rather more clunky learning plans than have been developed by other industries (think mobile phones).
We are quite used to doing things ourselves but most of us are still choosing simplicity over complexity, automatic over manual and increasingly we’ll be buying driver-less cars where we can dispense with the tedium at the wheel to get on with better things (like writing blogs).
The tedium of the debate may soon be over
For some (Tom McPhail) , the advice guidance debate is interesting and presents an intellectual challenge. For others (Henry Tapper) , it is a tedious waste of time. I have tested the advice/guidance perimeter in the FCA sandbox and found it a “sand trap”.
I have concluded both for AgeWage and for my personal finances, that simpler products , cleanly promoted are the way forward. Most people will pay for an instruction manual as part of the product rather than paying extra for a tuition course.
If they need a tuition course to use the product – it’s the wrong product.
Annuities, scheme pensions , drawdowns and cash-outs can be described and compared. But deciding across a range of options is often too much of a challenge. People can make decisions on financial and emotional grounds based on their circumstances but most people want the assurance that if they can’t take a decision they can rely on the wisdom of the crowd and follow the well-trodden path.
The well-trodden path may well be signposted by fiduciaries and even managed by fiduciaries but thee must be paths less obvious, for the explorers.
None of this is new, none of this very exciting. We have been following this course of action throughout our careers as we find ourselves joining pension schemes as a matter of course and having our money managed as others see fit.
People need help, but often help is no more than the assurance of Julian of Norwich
To place business recently I was told I had to have advice. The person introduced was asked for advice on a purchase life Annuity. I was sent an illustration for an annuity bought with my pension even though I stressed that I would like to see the breakdown between return of capital and the taxable
A career in compensation seems to be assured
“The alternative to employing an adviser is to learn to do it yoursel” is not the only model. Despite the best efforts of government, the UK still has a network of free advisers; generalist, money advice, debt, benefits and others. All aimed at helping people, particularly now with money issues. At the moment the knowledge about pensions is limited, and many agencies have been frightened off by being told that all advice in this area is regulated. There is a demand for raised awareness and knowledge in this area. Ferret are in the middle of a round of training days on benefits and pensions (which we’re delivering free) to advisers around the country, which are pretty much oversubscribed at each place so far. Providing such advisers with training and tools would be an cheap way for industry to make reaching a lot of people quick and effective.
Hello Henry,
The Help Gap,
As a ‘punter’ in all this I certainly feel a definite need for help/guidance, anything. I therefore endorse the above gentlemen’s views.
To your list above I would add: if you feel that the Managers’ are not as successful as they first seemed and that a change would be desirable; then how to obtain a transfer to another Manager without difficulties and loss. As you have mentioned in earlier blogs, this can be a wilderness to the uninitiated. In response to my comment then, you did email (11/09/2023 08:25) that you would kindly write about it.
To use your example of a new car, at least the stalks have international standardisation for safety purposes. What about the remote controls on TV’s etc?
Kind regards,
Tim Simpson