“What would be your advice?” These are words used by someone seeking an
opinion. That is all. There is no implication that any resulting
information will be acted upon, nor is there any indication whether this is
a one-off enquiry or just the first of many such questions.
We can glean no understanding from these words alone as to the likely
quality of the advice that may be rendered. Similarly, the ability of the
person posing the question to interpret any response is also unknown.
That is the problem with advice in terms of the UK personal finance
marketplace. It is all rather too much of an unknown quantity to the man in
the street. Investors need to have a much clearer understanding of the
different types of advice available, from the “this is the one for you”
one-off transaction to the long-term ongoing relationship, from the fully
discretionary at one end of the service spectrum to information only at the
There is good reason to believe that the UK will follow in the footsteps
of US experience, where it has been shown that the more choice available to
investors, the more they seek guidance in their decision-making.
There are many factors involved. Advice is not simply a case of providing
an intellectual service. Much of the comfort sought by investors from
professional experts could be better described as psychological, that is, a
calm, wise head in perhaps difficult or confusing times.
It is therefore essential that UK investors should have access to
good-quality advice of a type suited to their specific needs.
Interestingly, while it has often been assumed that market developments
over recent years would increase direct business flow, they seem rather to
have been a contributory factor to a growing reliance on different sources
Even sophisticated do-it-yourself investors are nowadays looking for a
combination of investment advice and centralised admin. Yet with honourable
exceptions, the overall quality of investment advice in the UK is not as
good as it could or should be.
Government, regulators and the industry have a mutual interest in the
future success of the advice market, especially if the Government is to
achieve its stated aim of enc-ouraging more people to provide for their
future personal financial security.
Yet the cornerstones of any successful relationship are trust and
confidence. Clients have a right to expect that fully competent,
well-qualified advisers acting on their behalf will bring additional
benefits to the personal financial planning process.
But it is important not simply to focus on the status of advice. It has
its price – and this should be immediately apparent to the investor. But
while both these elements have tended to be the focus of concentration over
recent years, they are just two components.
Advice is about far more than a single transaction. In most people's
minds, it is about an ongoing relationship, where a recommendation to
maintain and hold an investment is every bit as important as a
recommendation to buy or sell, currently the only services addressed by the
Autif believes the maintenance of training and competence skills is an
important aspect of the advice process. Increasingly in the future,
advisers will need to possess greater investment-related skills as the emphasis on sales-based skills and transaction-based skills recedes. High standards o
f portfolio management and financial planning skills are those that will be
in greatest demand – readily identifiable added value at a known price from
a fully qualified professional.