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 firstname.lastname@example.org