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Nic Cicutti: Online advice needs joined-up thinking

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One of the difficulties of reading Money Marketing, I sometimes find, is that in any issue there are many different stories, all of which aim to inform or examine an individual issue affecting the industry.

Inevitably, each story or contribution looks at them without always being able to join the dots and present a holistic view of what is happening within the industry as a whole.

Within the limitations of this 900-word article, what I would like to do is take up a few aspects of various discussions that have come to the fore in recent weeks and see if it might be possible to create a slightly more unified picture of an industry in transition.

But first I would like to invite readers to cast their minds back a couple of years ago, when predictions of the death of financial advice in the wake of the RDR were rife.

Almost 15 months since the RDR came into force, we know that the direst prognostications were simply untrue. The picture is far more nuanced than many believed back then, with the biggest casualties by far being salespeople from banks and building societies.

But elsewhere, IFA departures from the profession as such have so far been largely contained to not much more than typical annual wastage rates.

That does not mean, of course, there is no problem with regard to financial advice provision. Even if large parts of what passed as advice from bank salespeople focused more on product sales than financial planning, there will be many thousands of consumers who are now denied even that highly imperfect contact with self-styled advisers.

There is a need, therefore, to find ways of reaching and assisting not just erstwhile customers of those banks’ advisory arms but the many millions more who have always been denied an opportunity of genuine advice about what to do with their money.

And in the overwhelming majority of cases the reality is, as most of us know deep down, that neither the advice nor the product which may sometimes its necessary outcome, require highly complex solutions.

As Graham Bentley, managing director of the oddly-named gbi2 investment consultancy, said in a piece on the Money Marketing website: “Unfortunately, some advisers seem to think that the regulator requires some form of ‘special’ solution that requires artisan involvement rather than an off-the-shelf product.” 

Not only does the regulator not require this, but contrary to assertions from some quarters – take a bow Alan Lakey – neither do consumers, even when it comes to his specialist subject of protection insurance.

So the question, then, is how do we provide this more simplified advice and how should it be paid for?

Two weeks ago, I wrote in this paper that ignoring the growing role of the internet in the provision of good quality financial advice was a retrograde and Canute-like step. Surprisingly, in Money Marketing’s own poll on the subject, a third of those questioned seemed to agree.

Equally intriguingly, other IFAs make the same point, including Wealth Wizards chief executive of Andrew Firth, who offers online pensions advice. He wrote recently in MM: “The challenge is not to face-to-face advice, which must surely thrive in an environment of under-supply and over-demand.  The challenge is to the financial advice industry to wake up and develop solutions for millions of potentially unserved clients.”

In a separate article, Graham Bentley (I really must stop quoting him) put it quite simply:  “Let’s face it, most investment advice is already formulaic and tools-based and tends to follow the profiler/asset allocation/fund selection/auto-rebalancing format. Even the risk discussion process can be conducted by Q&A feedback.”

So the potential for simple, cheap advice is already here. How might it be paid for?

Well, Teresa Fritz, formerly of the Consumers’ Association and now on the Financial Services Consumer Panel, has come up with one intriguing suggestion.

She argues that the money should come from the many millions of pounds annually paid in fines from the FCA against rule-breaking financial firms.

Until recently, that money was used to help reduce the costs of regulation, not that it made much of a difference to individuals’ fees. In the past year, in a fit of opportunism, the Government decreed it should be used to support military charities but it is not clear how long this will apply for. Why not use it to fund a proper advice service instead?

The advice would be “general”, focusing on priorities and how they might be met rather than specifying product options. This advice could, hypothetically be both online and face-to-face, using existing structures such as those provided by Citizens’ Advice.

Informed Choice director Nick Bamford is not keen on this, arguing that the money should not go to the Money Advice Service, which he suggests is not “fit for purpose”. I would be inclined to agree with him.

In which case, why not detach Citizens’ Advice from the MAS, under whose thumb it has been forced to operate for too long, and directly channel to CA both the money for its already successful counselling service and a new generic financial advice service?

At the end of the day, the most important thing is ensuring as many consumers as possible get the financial advice they need. Individual ideas are out there, what we need is joined-up thinking.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. If I require advice from an accountant or a solicitor I do not expect anyone else to pay towards the cost of me receiving that advice. The same principal should apply to financial advice. If people require advice then they should be willing to pay the full cost of receiving that advice. If they are not willing to pay the cost for advice then they will not receive any.

    Using my accountant and solicitor analogy. If I walked into an accountants or solicitors office and said I want your advice but I am not willing to pay your fees I would soon be shown the door. Why is financial advice any different? Whilst there is an element of social service involved in giving financial advice it is not a social service.

  2. There is a fundamental difference between financial advice for gain and financial advice.

    I would suggest the majority of people do need financial advice, not from IFAs.

    Plenty of people offering advice, charities, MAS, CAB .. The list is endless.

    The bottom line Nic, is IFAs are not skilled in IT or have the time or resources to ‘go online’

    Simplified advice needs to be free and market forces will prevail and fill this gap.

    IFAs like Mr Bamford who start a blog and proclaim they’re the new age social media gods – won’t be the ones providing it.

  3. I agree Murf @8.36am to a certain degree. The problem is that most clients cannot afford to pay the fees we have to charge in order to saty in business and make a profit. The costs keeping a adviser firm open are ludicrous, PI, Reg fees, FSCS levies, FOS, business reviews, section 166 etc etc. Remove a lot of those costs and hey presto we have a solution but unfortnately that will never happen. The gravy train that brought all these to the fore is not going to leave the station.

  4. @Marty, I agree. Advice for the masses will not be provided by regulated financial advisers.

    It’s that simple. Let’s move on. Still a massive market of people who have assets, need advice and will pay fees.

    This is non issue. Do Porsche sit around trying to figure out how to make there cars affordable to everyone? Nope.

    None issue. Stop writing about it.

  5. T Murphy | 6 March 2014 8:36 am

    Isnt it the case that those that cant afford solicitors costs can seek Legal Aid? Therefore is the argument that there should be some form of assistance with the cost of Financial Advice a relevant one?

    The two are quite similar in that you will find people that can afford to pay for legal advice on certain subjects but would steer clear if they did not feel that the costs justified the action – much like Financial Advice…and you have those that desperately need legal advice but have no means to pay for it, much like those that desperately need Financial Advice. The difference being that there is a form of help for good quality legal advice.

  6. goodness gracious 6th March 2014 at 12:12 pm

    Not one of your best pieces Nic, you seem to have lost the plot in the later stages of your argument. It is quite clear that there are a load of people out there who require advice but cannot pay for it. But what do they need advice on? If it is debt, then the CAB works well. If it is on life cover, on-line portals do a job, not as well as I would like and at the same prices and commissions that I would get. If it is pension advice on small funds at retirement, if it is under £18k in total then take the money. If it is between 18k and 30k, online annuity providers are fine. Over 30k you must see an IFA, this would not reduce your retirement income against on-line portals.
    Advice on savings/investments cannot be considered to need any subsidised involvement and was the meet and drink of bankassurance. Those who bought bank funds and need advice can pay us, they are not skint!
    So do these unserved people need advice or information? I agree that the MAS is to generic and wishy washy to be of any use at all and is not fit to provide it.
    So Theresa’s suggestion of using fine income is for what? Certainly not to aid ‘Which’, who provides a disgraceful pension portal and was set up by the Labour party as a pressure group. I feel it’s charitable status needs to be reviewed, but that’s another issue. Advice for those with small lump sums to invest? Hardly a proper use of public money. Pension advice for those with small pots, or financial education? What is she thinking of? Advice for those younger people who need education would be better provided by messages printed on shot glasses saying ‘You should be saving money for a house deposit’ or on Stella glasses saying ‘don’t look at life through the bottom of me, start your financial planning tomorrow’. ‘You can lead a horse to water, but only tap water please, Vittel is too dear, save money!

  7. @ Black Dog

    Never proclaimed that we are new age social media gods that thought must rest only in your head whoever you are

    @Paul McMillan I thought you said you only allowed people with something sensible to say to post on your site?

  8. @ goodness gracious: how about working out what a consumer’s financial priorities should be and putting him/her on the right track – and then letting a financial adviser take over insofar as it comes to specific details of what products or or other advice they migth need….

  9. So many illiterate people in one place……

  10. Nic, I am a tad disappointed that you have jumped on the bandwagon of stating that people over-exaggerated the demise of the financial advice industry under RDR.

    I can assure you that, notwithstanding the withdrawal of a large proportion of the banks’ advice armoury, many IFAs’ have chosen, or have needed, to stay on to see how things work; the numbers are now not adding up for quite a few of these people (indeed there are many business owners {small and large} who are relying heavily on servicing trail income to support their existence within the industry).

    As for the Graham Bentley remarks, I also have read his recent articles, but I have to say that whilst he is well placed within a product provider, I don’t think he nor his staff are really at the coal-face with the consumers and so to wax lyrical about what they do and don’t need or will and won’t do, is a bit naïve.. If he is working from the results of public surveys, the information is only as good as those that choose to respond and if you ask any IFA, you will find that a large percentage of clients just do not interact with surveys.

  11. Roger Harcourt 7th March 2014 at 2:19 pm

    @Bamford – you seem determined to censor any negative opinion of yourselves, I wonder why?

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