This year we celebrate 30 years of Money Marketing and I have been contemplating what has been the most defining moment in financial services over that time. Of course, there have been world-changing events, such as the bankruptcy and subsequent collapse of Lehman Brothers in 2008.
Indeed, the largest bankruptcy filing in US history made markets shake like never before. There has also been legislation, such as the Financial Services Act of 1986, which laid the foundation of liberalisation and consolidation of the industry.
But even though the above are events that will always be quoted in history, my mind keeps coming back to the outcomes of the RDR.
While not in itself the biggest, most significant event of the last 30 years, it has inadvertently led to thousands of lines of press comment about poor consumer outcomes and people believing they cannot afford financial advice.
Citizens Advice announced this month that almost half of the adult population – more than 23 million people – would have taken financial advice at key moments of their lives if they had been offered it.
In December 2012, the first month in the brave new RDR world, the number of IFAs and tied advisers was 20 per cent down on December 2011 figures. The number of bank advisers had fallen 44 per cent. These numbers may now be increasing again thanks to the fact the demand on examination halls has subsided but the demand for financial advice is higher than ever before.
Chancellor George Osborne’s unexpected announcement on pension freedoms could well result in unintended consequences, with Royal London reporting 69 per cent of its pension clients have taken their entire pension fund as a cash lump sum since April. One Fidelity client even took the cash and bought a Routemaster bus.
In order to ensure pension freedoms are more efficiently offered, the FCA is consulting on many matters, including how providers can give consumers information on the sustainability of their income.
Over the years, I have been to many conferences with speakers glowingly sharing the Australian pension “success” story.
However, today, one-third of older Australians are living below the poverty line. There are lessons that should be learnt from the country.
Indeed, in the UK, one in six pensioners are living in poverty. It is crucial we ensure this figure does not get any worse and, as such, we need to make it easier for the 23 million people that have not received financial advice to be able to do so.
Whatever the outcome of the many FCA papers on financial advice and pension freedoms, half of the population desperately needs the banks and building societies to offer client-specific financial advice alongside an improved Pension Wise.
And they need to do this before thousands more people cash in their entire pension and spend it all on a passion.
Kim North is managing director at Technology and Technical