I often ponder to what extent we overcomplicate things as financial planners. A few years ago, I was pulled up sharply by a prospective client, midway through a pitch for our estate planning service.
“But I don’t have an estate,” they interjected. That service was swiftly renamed “inheritance tax planning”, with the desire to do what it says on the tin.
When I’m writing the show notes for my podcast each week, I’ll often catch myself relaxing into the use of technical terms. If we feel comfortable throwing around three-letter acronyms and technical jargon, it’s because we live and breathe this stuff. Our clients don’t.
I understand the temptation to live in a world of complexity. After investing countless hours in acquiring this advanced technical knowledge, through examinations and on-the-job experience, why dumb it down again?
There’s an argument that all professions create high barriers to entry, using jargon and customs to keep outsiders on the outside. Within retail financial services, add the FCA rulebook, massive Financial Services Compensation Scheme levies, capital adequacy requirements, huge professional indemnity insurance premiums and a multitude of other barriers. You can’t sit with us.
I do not doubt that the majority of the work we all do for our clients is of high value and extremely worthwhile. As we do this great work, we need to take care not to neglect the basics. At the end of last week, I got around to completing some household admin tasks. I hate doing these and, despite what the letters after my name might suggest, I’m not as committed to my own financial planning as that of my clients.
One of the long-overdue items on my task list was to review our home energy contract. The one-year fixed-term contract was about to expire and the current provider was proposing a hefty price rise. Five minutes later on a meerkat-inspired website and the job was done. Five minutes and £388 better off in 2019.
Convert that to an hourly rate and I need to give up both of my businesses, to devote my time entirely to finding more competitive gas and energy bills.
The exercise got me thinking about the annual wealth check agenda we work through with each of our clients, at least once a year. For some reason I can’t now understand, reviewing energy contracts isn’t currently on that agenda.
A super-complaint filed by Citizens Advice suggests consumers are suffering a £4bn-a-year “loyalty penalty” by not reviewing and switching a small number of household bills. That’s an average of £877 a year we could, as financial planners, save our clients.
At a time when clients are becoming increasingly sensitive to fees, surely making substantial savings like this, on top of the savings we make by recommending the most suitable investments and product wrappers, would engender greater loyalty.
Martin Bamford is managing director of Informed Choice