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Focused advice is the saving grace

Why don&#39t people save more? This appears to be the number-one question on some ministers&#39 desks. Because they do not have enough money is the stunningly simple response.

Other responses are that they are pretty bored by the subject and, anyway, have little confidence in financial services&#39 companies.

Because they are put off by the complexities of products and of getting advice is a third reply and a fourth reply is because there has been a remarkable reduction in the distribution capacity of the sector.

There is not much to be done about the first and the second is a long-term haul involving an educational effort aimed at those who do not use financial services rather than interesting material aimed at hobbyists. This subject deserves a column to itself.

But what of the third and fourth responses? It is time to get stuck in to the debate of the availability of advice.

Over the summer, we can expect ideas from all sorts of sources (including Aifa) for making advice simpler to give and available through more outlets.

This is after all the main theme of chapter five of CP121 so there will be many working parties drumming up ideas for “two-tier advice” or the idea that advisers with fewer qualifications can advise on a limited range of products.

Can this idea be turned into something which can work to the advantage of consumer, industry, adviser and politician alike?

First, let us stop talking about twotier advice. There is nothing more offputting for an adviser than to be told that he or she is in the second division (let alone the consumer&#39s feelings).

We should be talking about foc-used advice. Anyone who seeks advice is entitled to get expert advice but the expertise can be focused on just one particular area rather than across the board, provided that the consumer knows what is on offer.

I see this as a win for the adviser community because it could provide the route by which new blood comes into IFA firms and starts to earn its keep while being trained.

An individual who reaches certain standards can start learning the personal skills necessary for a good adviser in front of consumers offering them focused advice in the area where expertise has been demonstrated.

The consumer gets more access to advice, the trainee gets valuable experience and the firm secures some income to defray the expense of training.

Of course, the trainee will need supervision and, of course, there will have to be controls so that the trainee knows the limits of expertise and refers on those clients beyond that expertise.

Naturally, this is not a riskless approach. The regulator for one can make or break this idea by its attitude. Firms have to have confidence that focused advice is judged on its merits. If retrospective decisions are taken by the FSA or the ombudsman that a focused adviser came up with a sub-optimal solution because of lack of knowledge or too much focus, then the approach is doomed and many consumers who need advice will be deprived of it.

The IFA practice may also need to adapt its approach. I remember that the first execution-only stockbroker in the UK made a rule that it would not recruit anyone who had experience of stockbroking because they would not be able to restrain themselves from offering advice.

That is why I suspect that focused advice is going to be primarily delivered by those entering the IFA sector for the first time.

So the opportunity is there. We are going to have to take a deep breath before grasping the opportunity but that is no excuse for not even trying.


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