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Mel Kenny: Prepare your clients to be less surprised

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

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. ” … 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.”

    Errrmmm … a power cut?

  2. @Cassandra

    On Saturday evening at G-Live in Guildford the London Symphony Orchestra were in the midlle of a Tchaikovsvky Piano Concerto when there was a power cut. The stage was in darkness

    As stage hands bought out little torches to put up against their scores the LSO played on- brilliantly

    A power cut would be no surprise to an adviser as described by Mel Kenny

  3. I have no doubt you are correct, Nick.

    Ever heard of Sydney “Torch”?

    Ever heard how in 1938, it was that very Sydney Torch who was the “conductor” for … ????

    Yep, you guessed it, no surprise in this at all

    It was indeed the Midlands “Light” Orchestra.

  4. @Cassandra

    I am old but not that old 🙂

  5. I wonder if anyone has told Warren Buffett, a man who doesn’t use a computer?

  6. Without doubt, Mel, an “intermediary” today is radically different from his predecessors, and needs to be.

    Amongst the causes, would you agree that it has in part come about through external enforcement elements such as RDR, and for me perhaps even more significantly the advent of the digital world which we now inhabit.

    However, there is for me an undertone in your article which suggests a semblance of superiority, in old -v- new.

    Whilst that is perhaps understandable, there is, for me today, too much of a near evangelical outburst proselytising the “church of the new model adviser”.

    I am far from personally convinced that new is in essence superior, believing it is in reality not much more than an evolutionary adaptation to a radically changed environment, which must indeed evoke changes in “how” an adviser performs his functions. Yes, of course, that should lead to better outcomes, but is that in any way guaranteed?

    Your article imho loses its real significance by partially adopting that tone of new -v- old, and in doing so diminishes the very real and hugely significant debate that your article raises.

    What will be the effect of an interest rate increase, where will the NHS be in 10 years time, you ask. These are indeed matters of real importance for all advisers in their relationships with clients looking at the short, medium and most importantly long term, and in trying to plan accordingly. But are “new” advisers in any way superior to their “older” predecessors in both analysing such matters, and reaching the correct conclusions?

    An example:

    Peter Oborne’s recent tirade against those who had in the past supported the UK’s entry into the Euro, and who had denigrated those who stood out against any such move, perhaps makes my point.

    Your own study of economics would have told you, I believe, that a monetary union absent a balancing fiscal union was a disaster waiting to happen, but as was evident then, and even more evident today, it is not within a vacuum of economics where the solutions may be found it is, as we watch matters unfold, the realm of politics which may hold the eventual sway.

    But where in such economic and poliical events, and their consequences, sits an adviser, whether old or new? All seeing, all knowing?

    No matter the technology, no matter the examinations passed, are they legitimately able to adopt any tone of superioruty, or are they as hostage to external events, whether economic or political, as were their predecessors?

    It really is a big world out there, and from that perspective, the individual adviser, no matter his abilities and personal attributes, remains very very small.

  7. “Touch of a button” was more so a reference to having the ability to change quickly rather than get anchored on hoping something happens to get us back to the previous norm.

    Mike, you are right, we were taught that the Euro was doomed from the outset. But I wouldn’t be surprised if over time, new editions of the text books diluted the threats as every country seemed to be a winner year after year and as soon as everyone was comfortable and happy in the new normal of a working Euro….BANG!!

    “We” get surprised again. Oh so seemed Nick Clegg at the Lib Dem conference

    “I don’t think anyone could have predicted at the time the euro was created that the rules which were supposed to be in place to ensure that everybody looked after their own financial affairs properly would be so spectacularly ignored and broken”

    Some of us can get deluded…

    The message is to warn certain personality types to not get deluded, keep on your toes and prepare you and your clients to be less surprised.

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