The benefits of advice are clear, yet the industry still struggles to get consumers through the door
As someone who is now accustomed to being variously described as “seasoned”, “experienced” and, in one case, a “veteran” of the industry, it is safe to assume I know something about the world advisers inhabit.
Indeed, 30 years have passed since I began my career as a graduate trainee at a long defunct mutual insurance provider. During this time, two things have remained constant: regulation and a need to engage with consumers in a meaningful way.
There is no doubt regulation has hugely improved the levels of protection afforded the consumer. So is it reasonable to assume we should expect to see greater numbers of consumers seeking advice, knowing they are protected if things go wrong?
Unfortunately, there is little to show in terms of a correlation, and one of the areas I want to explore here is how, as an industry, we can better engage with consumers.
The FCA aims to promote effective competition in the interests of consumers on the basis they are empowered, as well as informed when competition works well. As advisers, we must look at what we can do to better support engagement.
Let us start with some good news: the latest Platforum Consumer Insights report confirms that the tendency for consumers to be entirely self‐directed decreased in 2017. This contrasts with a substantial increase that Platforum saw a year ago. Similarly, the proportion of entirely advised investors fell off considerably a year ago but the latest figure is back in line with previous years.
Nevertheless, the report highlighted that one third of British investors deal with their investments themselves with no help or advice from experts, whereas less than one fifth leave it all to an expert and have as little to do with it as possible.
It did also find that the future intentions of cash savers who are thinking about investing suggests there is a healthy pipeline of potential new clients that may need advice. However, every silver lining has a cloud, and this one’s can be seen in the finding that half of these investors are likely to go to a high street bank, compared to one fifth who would go to an adviser.
It is disappointing that more people do not go to an adviser, since advice has clear benefits.
Indeed, research published by the International Longevity Centre and Royal London last year found that those who received financial advice between 2001 and 2007 compared to those who did not were, on average, £40,000 better off by 2012 to 2014, and had accumulated significantly more liquid financial assets and pension wealth.
In the words of the report’s author, Ben Franklin: “The clear challenge facing the industry, regulator and government is therefore to get more people through the ‘front door’ in the first place.”
Yes, it is disappointing indeed. I would be interested to hear your views as to the tangible steps we can take to improve matters.
Tim Sargisson is chief executive officer at Sandringham