When I was studying economics in the early 1990s, I remember the sixth and last main function of the Bank of England as the one that never happens – lender of last resort. Looking at the textbooks now, this is classed as one of the top functions of the bank.
It is a stark reminder that nothing stays the same and if you do not change when everything else around you does, then prepare to fail.
There is a lot of talk about the changes coming to our industry but change is already under way and shows no sign of slowing. When the RDR is complete, that will not be the end of change. The question, what will my business and the industry look like in five or 10 years, has a simple answer – it will be in a state of change. Contrary to first impressions, this can be a helpful insight. Those who build monolithic, inflexible businesses will suffer.
It already feels to many as if we are in normal times again yet interest rates at 0.5 per cent are far from normal, as we know it. Anybody who predicted such a state of affairs 10 years ago would have been dismissed as a lunatic. An interest rate so low is just harbouring even bigger surprises for us around the corner. Imbalances will burst and the ignorant will be “surprised” again.
Old-style advisers often sell themselves on their ability to pick funds and find the best product – little more than a personal shopper with a huge blame tag.
If both gold and the Dow hit 3,000 in a gut-wrenching twist to the “normal” market before a massive bull market resumes, it may prove too much and leave the hopes of advisers and their clients in tatters. It seems many have forgotten about the high inflation of the 1970s, 1980s and 1990s, since most annuities are written on a level basis. Or were the inflation and gilt yields of that era a blip rather than the norm? Are annuity rates today better than we will get for a long time?
It seems that people really believe the NHS will still be around in 10 years and that the long-term care issue will solve itself, as less than 10 per cent of advisers give long-term care product advice. Are you open and dynamic in your thoughts about all these issues?
Are you preparing your clients to be less surprised or do your clients and prospects regard you as the last person still using phone boxes and wondering how computers work? For those advisers who are into touch-of-a-button financial services, put themselves out as a go-to person who is sharp, ahead of the game and enjoys navigating life’s challenges, nothing is a nasty surprise.
Mel Kenny is a chartered financial planner at Radcliffe & Newlands