Managing director of gbi2 Graham Bentley shares some strong views on adviser charging ahead of his appearance on the panel discussing the discretionary dilemma- whether firms need new permissions at Money Marketing’s Interactive conference in London on 4 April.
What key reforms would help get people saving more?
Reforms won’t persuade people to save if by nature they’re disinclined to do so. Bizarrely perhaps, higher interest rates might. The household savings ratio in the UK was 4.3% in 2018 versus a retail interest rate of less than 1%, while in the 1980s and ‘90s when boomers were making their money, that ratio and interest rates were both up to 15%. Borrowing was expensive, while saving was nominally rewarding. Today people buy now on cheap debt and pay later, rather than save. Unlike in the pre-RDR era, people who do want to start saving £100 per month are unfortunately of little, if any, interest to ad valorem fee charging advisers.
What do we need to do to improve financial literacy in the UK?
In the 1970’s, a school in Leicester designed a course and recognised qualification based on “The World of Work”, for kids who were staying on at school an extra year, after the school leaving age was raised to 16. It included a basic understanding of income tax, national insurance, mortgages, insurance and the state pension. I don’t see any reason why something like this can’t be a standard (and mandatory) course in secondary schools, from year 9 let’s say.
How can advisers best show their fees are worth it?
Demonstrate where the client would be without the advice (e.g. doing nothing) and show how the outcome financial benefits following advice (e.g. tax saved, profits anticipated) far outweigh the fees. Admittedly, this is easier to demonstrate where fees are ad hoc, versus ongoing…
What do you think marks out a truly innovative planning practice today?
Recognising and unashamedly promoting the idea that financial planning is a separate (and more valuable) service than portfolio management, and not trying to subsidise the advice by running model portfolios for an ad valorem fee.
What is the one key skill all aspiring advisers should learn?
Understanding that they have two ears and one mouth – and to use them in that proportion.
If you could make a magic wand, what one thing would you change about how the advice profession operates in the UK?
Ban ad valorem – charge a fee for each piece of advice, and separately negotiate a retainer where it is clear that the client wants the adviser at his or her beck and call 24/7.