Asked earlier this month for his 2017 financial resolution, the newly knighted former pensions minister Sir Steve Webb replied it could be summarised in four words: ‘get a financial adviser’.
No matter how much assistance you can find online these days, most people would still think twice before setting out to sell their own house or draft their own will. Nor would they be inclined to fit their own boiler or do their own dentistry. And yet, for whatever reason, people tend not to think of financial advice in the same way.
I say ‘for whatever reason’ but, historically, two elements have tended to loom pretty large: trust and cost. As the editor of a magazine for financial advisers, I accept it is possible I am suffering from a kind of Stockholm syndrome – that after a prolonged exposure to these people, I have grown overly sympathetic to their cause – and yet this is a profession that has of late been regulated within an inch or two of its existence.
The Retail Distribution Review, which came into effect five years ago, may be clunkily-named but it has been no slouch in working towards its stated aims of improving clarity for those looking to invest, raising the professional standards of financial advisers and, by banning commission payments from product providers, reducing the damaging perception of a major conflict of interest: for whom was the adviser actually working?
As I say, I may be conflicted here myself, but cost would certainly appear a bigger consideration these days, and, as it happens, that goes two ways. Ideally, when you weigh up the issue of taking financial advice, you will do so through the prism of value for money rather than bare cost and yet, should you conclude advice is expensive to seek, there are plenty of advisers who see it as expensive to give.
One consequence – presumably unintended – of the Retail Distribution Review is that advisers are now having to think a lot more carefully about the clients they are prepared, or can afford, to take on. Combine that with a second consequence – thousands leaving the advice sector after concluding the game is no longer worth the candle – and you may not be able to find a financial adviser even if you want to.
Markets, like nature, abhor a vacuum and others are coming forward to fill this ‘advice gap’. The Government takes a second stab at an Advice Service next year, while a growing number of ‘robo-advisers’ are marching off the production line – though an advisory R2D2 has yet to emerge. And it can only be a matter of time before the high street banks forget what a lousy job they did giving advice last time around and start touting for business.
Still, whatever arguments you may have against seeking financial advice – trust, cost, availability – there is one big reason you may have to. Planning your finances has become awfully complicated and looks set only to grow more so. Take pensions – a favourite area for government intervention as politicians find it so much easier to tinker with what for many voters is still the future.
The so-called ‘pension freedom’ changes of the last two years were supposed to make retirement planning more consumer-friendly but they have also landed people with significantly more responsibility and some crucial decisions to make about how they turn their pension pots into cash or income. While many may be inclined to try and give it a shot on their own, this may not prove a prudent course of action.
Financial advice has changed hugely in the last decade – and mostly for the better. Should there ever come a time when a journalist’s salary warrants it, I look forward to the January when I can follow Sir Steve’s resolution myself.
Julian Marr is Editor of Professional Adviser
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