Journalists and financial advisers might have more in common than you think. For starters it appears that the many consumers do not really want to pay for our services.
The challenge both industries now face is how to persuade the public that they provide something worth paying for.
Once people paid for a daily or evening newspaper. Today there is a glut of free-to-access information via rolling TV news channels, websites and the blogosphere.
Advisers face a similar problem – only here most customers have never paid upfront for their services.
Of course, this advice was never free. But now costs are clearer, people are asking more pertinent question about what are getting for their money.
This issue made headlines again with Axa’s decision to close its bancassurance arm. It has concluded its customers are unwilling to pay – or pay enough – for it to offer this service profitably.
It’s not the only one to have reached such a conclusion: Santander, HSBC, Barclays, and Lloyds no longer offer financial advice to the vast majority of their customers.
This begs the question that if companies of their size, with millions of customers and a high street presence cannot make money from financial advice what hope is there for smaller independent companies that make up the backbone of this industry?
The perceived wisdom has always been that economies of scale help companies deliver products and services more profitably. Banks already have trained staff, compliance departments, up-to-date technology, a branch network and so on. They pay for this to provide banking, mortgage and insurance services. Surely they do not have to earn huge margins on financial advice to make it worthwhile?
Now, I am no commercial accountant, but I assume that most advisers have to cover the cost of all of the above before they can start making any money for their businesses.
Yet there are thriving advisory firms out there. How are they doing it? I’m sure not all have adopted the same strategy. Some may have charged fees for years, and been used to demonstrating the value of their advice. Others may offer a more high-end product. They may sense consumers, who may baulk paying some wet-eared 23-year old for an Isa recommendation, might pay to talk to amore qualified and experienced adviser.
Others will still target the more mass market, with technical solutions, giving access to tools and data that help customers monitor and manage their money. This may fit more closely to the execution-only services delivered by the likes of Hargreaves Lansdown, and many others.
But it will be interesting to see how these services and charging structures change when the second phase of RDR comes in. In theory this should make charges easier to compare (though I am betting it will still be a pretty complicated). It will be interesting to see how many customers pay a higher fee for additional services, or whether more migrate to no-frills cheap and cheerful options.
The problem for advisers (and journalists) is it can take time to demonstrate their worth. Reddit can name one of the suspects in the Boston bomber in seconds. So why pay for an iPad subscription to your favourite newspaper?
But Twitter and Facebook comments are not always the most accurate source of information. Established news providers need to demonstrate they are – as well as providing informed and entertaining comment that is a step up from the everyday internet flotsam.
In the same way advisers have to prove that the quality of their advice makes clients money, cuts their tax or saves them time (or preferable all three). That’s not easy to prove on an initial meeting. But if advisers don’t deliver on this they could rapidly lose customers, a risk that the banks clearly are not willing to take.
Emma Simon is deputy personal finance editor at the Telegraph Media Group