An Open Response to Financial Advisers` Comments
Some interesting comments have been made in “Money Marketing” in response to the launch of money-guidance.co.uk. Despite some of the hype invariably associated with Press Releases, the supporting ‘Key Messages’ did make reference to the fact this initiative represented an attempt to empower consumers to go as far as they personally could within a financial planning framework, but was not per se against financial advisers.
First, all good financial advisers will agree on the need for clients to adopt a structure – this would normally involve, (a) the collection of relevant information, (b) an assessment of risk tolerance and capacity, (c) an understanding of future needs, often supported by cash flow analysis, (d) the formulation of an appropriate generic asset allocation for investment purposes and (e) the translation of all this information into specific investment recommendations. Empowering the consumer need not be synonymous with replacing the adviser.
Second, experience has taught us all that what can be mechanised will be mechanised. Thus, if a consumer can participate in, say, the first four stages of the above process, (he) will not only able to mitigate fees and be more engaged with his own situation, but will understand more about (his) own limitations and should be more receptive to professional advice, with the fee premium this rightly carries. “Sense-testing” and adviser intervention can accompany any of these stages – the objective here is to break down the historic asymmetric information which has existed between principal and agent. Realistically, should the same hourly rate apply for asking someone the age of his children as for delivering complex solutions?
Third, if the ABI`s figures are to be believed, 50% of consumers will not pay fees and a further 30% will pay no more than £300 to obtain a full advisory service. Additionally, there is an intractable element of the population that will always prefer self-governance. Independent advice, post RDR, will exist firmly in the top decile of consumers. I respectfully suggest that the website offers no threat, as Dominic Thomas rightly observes, to good financial planners; on the contrary, it may serve to grow the market for advice through greater engagement.
Fourth, despite doubts expressed to the contrary about potential savings, I am aware of minimum advisory fees to implement and deliver cash flow software of £1500. Voyant is a sophisticated tool that may well serve as a catalyst for financial adviser intervention. The suggestion that advisers might take advantage of the free site is very questionable, unless of course they wish to share key client information with a competitor.
Very little stands still. As financial advisers have educated and pushed themselves further up the hierarchical scale, government intervention has caused a void for consumers which sound commercial sense suggests should be filled – unless the notion is that everyone should be popping into their local friendly bank from next year?