“It’s life, Jim, but not as we know it.” This Star Trek phrase from almost 40 years ago may ring a bell for advisers today in more ways than one. We are all living lives not seen before, powered by technology, social media and integration of different cultures.
The Englishman’s castle is no longer his home, with home ownership at its lowest level since 1985, according to the English Housing Survey. Of the estimated 22.8 million households in England, just 63 per cent were owner occupied in 2016.
This, alongside higher rental costs, means saving for the future is moving lower down the list of necessary expenditure.
More financial education showing the importance of building both short- and long-term savings is needed and it should not all be left to the journalists. The providers should put their hands in their pockets and pay.
Earlier this month, leading economists speaking to the Treasury Select Committee reported that the disparity in personal savings and pensions between various groups in society was stark.
Three-and-a-half million women have defined contribution pension schemes – less than half the number of men. What is more, men have more than double the £55,000 pension pot of the average female saver.
The economists also predicted the young would opt out of increased automatic enrolment pension contributions in order to save up to buy a house.
It is the responsibility of all of us in financial services to help people save for retirement. We place too many hurdles in front of product purchase. Setting up non-bank savings is challenging.
When consumers do sign up to a product, the way we communicate is poor: complex or unclear language, typos or inaccuracies, and inconsistencies in design or font. The way we take products to market for the young and women, in particular, has little resonance and thus results in low take up.
The rich are 64 per cent richer than before the recession, while the poor are 57 per cent poorer. What is worse is that this widened gap is expected to be permanent.
Those that can afford to pay professional advisers can expect higher returns than the unadvised. Indeed, the RDR resulted in access to good advice being taken away from those who need it and the Financial Advice Market Review has done little to remedy the problem.
The guidance organisations (particularly The Pensions Advisory Service) do well but they cannot answer the question of “which company and which product should I save with for the future?”. This is the problem.
With a big fanfare at launch, robo advisers were heralded as the saviours to fill the advice gap. But if true, it will be a slow burn, with non-advised online propositions holding just 0.9 per cent of assets under management, according to Boring Money.
Regulations need to be less strict in order to help people access financial services products more easily. As Spock said: “Logic is the beginning of wisdom; not the end.”
Kim North is managing director at Technology & Technical