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Nic Cicutti: We need educating

I blame Robert Reid for this column. After all, if he had not penned one of his comment articles last week, in which he let slip that he has just come back from some far-flung foreign conference lecturing the natives on UK financial services issues, I would not be writing this article.

As it is, having returned from San Diego, in which he spoke on the RDR and the removal of commission, Rob then proceeded to do what he does best – riffing about this and that, such as the Advertising Standards Authority’s rejection of complaints about the Money Advice Service and the appropriateness of “alternative investments”.

But it was a final thought in his last couple of paragraphs that really set me thinking: “After the last two market corrections, we need to ensure clients understand risk and have the capacity to take the worst impact from these alternative products.

“Clients want the best of both worlds, they are greedy but cautious and this is impossible to deliver. Education of clients will become a necessary part of he professional adviser’s armoury. Without it, they will be unarmed and vulnerable.”

Forget the bit about alternative investments, it is his view of clients themselves that hits the nail on the head – greedy but cautious.
As it happens, I recognise that duality in lots of people I know. Although the precise level of each feeling varies between individuals, all of us are controlled to some extent by similar emotions. In my case, I would say I am more of the “greedy but fatalistic” type.

What is really important about Rob’s observation is his follow-up to the effect that education of clients is key to the process of advising them. You see, I have had that same feeling for a long time.

Over the years, I have come across a range of adviser “types” within the IFA community. Three of the most common are the Doctor, the Hi-Fi Salesman and the Teacher.

The Doctor is the person you go to with a problem and he then offers a solution. You are not required to know what the solution really is, just that he has found the right one for you and, as long as you wait a few months or years, it is bound to come good. If it doesn’t, it can be tweaked a bit until it does.

One of the advantages of being a Doctor is the client thinks you are omnipotent. The disadvantage is that the minute things go wrong, he or she will realise they have not got a clue what the Doctor was doing with their money, which is when the problems start.

The Hi-Fi Salesman is a different kettle of fish. Here, the client knows they are seeing a serious specialist. He (it always is a he) knows everything there is to know about Blu-ray, home cinema packages, subwoofers, multi-channel power amps, processors and music servers.

He is not averse to sharing this knowledge with you and will happily tell you all about a system’s tonal differentiation and line outputs. The only slight problem is that you do not understand a word of what he is saying and take it on trust that what he is recommending will actually work for you. As often as not, you will end up with a 46-inch telly in a 10ft square living room.

The Teacher is the one who not only wants to sort out your finances, he also wants you to know why he is doing it, what the consequences are and how it could work in your favour. The price of seeing a Teacher is not only the charge for his financial advice but also being lectured on what is good for you. As long as he or she is not too didactic, that’s fine by me.

Of the three, I would rather have a Teacher talking to me than a Doctor or a Hi-Fi Salesman. When I see a financial adviser, I am not just expecting him or her to sort out my finances and investments. I want someone who will have a dialogue with me, who will explain and educate, who will rein in some of my wilder flights of fancy about an investment idea I picked up in the Sunday newspaper. He will also introduce a fresh idea I had not considered and tell me why it makes more sense than mine.

I realise that in so doing, the chances are I will initially be paying far more for advice than someone who simply relies on the IFA telling someone what is good for him. But over the long term, it is better for the adviser to educate me, if only so I start to understand more about why certain decisions are necessary and how to avoid costly mistakes.

Such a relationship is also good for the adviser, in that at least he is forced to think carefully about why he is making a particular recommendation. The process of explaining why is often a useful aid to clarifying the advice in his own mind.

Which is why Robert Reid’s conclusion about his clients – that without education they will be unarmed and vulnerable – applies equally to advisers themselves. It really is in your interest to start educating us.

Nic Cicutti can be contacted at


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There are 14 comments at the moment, we would love to hear your opinion too.

  1. Totally agree Nic. I reckon I spend over half of my time with clients educating them about how financial planning works, from the basics of what is a corporate bond, to how business property relief can save them thousands in IHT.

    If adviser numbers really are to dwindle post-RDR, people will turn to the internet to educate and advise themselves, and I intend to be a big part of that, which is why I set up a year ago. With 149 videos and counting, the feedback has been brilliant, and I know there will be many more advisers who do something similar.

    It ought to start with good education in schools, but the benefits of education continue long after that. I’m convinced the reason I never get any calls from concerned clients during volatile markets is because I have educated the client properly about how markets work. So I benefit too!

    A great article – thanks.

  2. ” It really is in your interest to start educating us”
    you are correct Nic, you do need educating. Only trouble is, with your blinkers, you are unteachable.
    Well done to pete, getting a free plug from nics article.

  3. Good article from Mr Cicutti this time.
    I must admit I generally fall into the teacher catagory and try to explain things to people even if they are happy to proceed with my advice, without understanding it. However, when I relise I am banging my head against a brick wall sometimes I just sell them the 46″ plasma.

  4. Never thought I would say it about one of Nic’s articles.
    But I do think that article provides a reasonable summary of the folks I have known in this industry over the last 38 years.

  5. The challenge is that education is a process, not an event. As such it is does not fit neatly into an ‘initial consultation followed by an annual review’ type process. It takes more time, and without innovation, that will mean higher costs.

    Pete has taken the initiative to innovate, and as a result, IMHO has earned the right to his free plug for

    I think we will see a lot more innovation in the near future.

  6. Nic, I agree with your comments but you have missed something crucial:

    Teaching is a vocation primarily funded by the state. It is not a comercial enterprise.

    Additionally, if you teach somebody to do something and they take action they carry the risk.
    In financial services if you teach somebody something, they do it and goes horribly wrong, they accuse you of bad advice knowing fine well that ‘Paddy’ ( my name for the FOS) will for the teacher to refund the losing bet.

  7. Great article Nic. I believe that we do our financial planning with, not for, our clients. The clients who reagard me as a doctor, despite my best efforts, are the ones that worry me the most.

  8. I think most IFAs are ‘teachers’ – I certainly am. In any case, it has been a requirement to support a recommendation with a suitability letter (or whatever they’re called these days) for some time – that in itself tends to get rid of the mysteries of how, why and what.

  9. I have and always will be a “professional friend” to my clients, ensuring they are always clear as to what their stated objectives and needs are, why any particular product is recommended, why it is suitable and what the client can expect from it.

    However, if I wanted to “educate” my clients in the principles of financial planning and the various elements of each product and its risks, I would need a salary from the government and possibly have to take a “teacher training course” before I could take up such a task,

    CLIENTS need to educate themselves and the only addition to my services for clients is to construct various Q & A meetings to ensure they are clear as to what I am recommending.

    We are in the business of advising on financial planning and suitable products, but no one who drives a care needs to know the scientific principles of the internal combustion engine, the computer technology and software employed in the fuel and engine management system to appreciate the comfort, security and freedom of travel a car provides

    Thus it is with investment, protection and pension products. The tech specification is in the KFD, after the second or third page a clients eyes glaze over and we can then only summarise the benefits, advantages and disadvantages of the product.

    We are in the business of Financial Planning not education.

    That is what we are paid for. (eventually, but the FSA would have us all pro bono and paying for clients services out of our own pockets if they were allowed to have their way)

  10. “no one who drives a care needs to know the scientific principles of the internal combustion engine, the computer technology and software employed in the fuel and engine management system to appreciate the comfort, security and freedom of travel a car provides”
    True, but people who do have a modicum of knowledge of the workings of a car engine will appreciate why it’s not a good idea to start the engine and go roaring off straight away at 5000 rpm, and why it’s detrimental to just turn a turbo-charged engine off at the end of a journey without letting it idle for a while first. Sure, they don’t NEED to know these things, and they may well find them out if they read all the details in their policy terms and conditions (sorry, car handbook), but knowing WHY they shouldn’t do these things will help them avoid unnecessary damage.
    Granted some folk may not want to know or may not care, but it seems a shame that others should be denied the chance of understanding.

  11. “However, if I wanted to “educate” my clients in the principles of financial planning and the various elements of each product and its risks, I would need a salary from the government and possibly have to take a “teacher training course” before I could take up such a task”
    Totally agree Ned. What people like Nic fail to realise is that many people expect you to do just that, free of charge, of course, so they can then go home and do it themselves online.

  12. The problem with education is that people have to want to listen and many don’t as they have enough on their plate.

    Example I am dealing with a company who wish to set up benefits for their employees and we sent out a qnairre to see what they thought was important, life assurance income protection or pension. If it was pension what were they looking for and would they be prepared to contribute etc.

    Only 14 completed the qnairre out of a possible 75 and the bulk of those were in the 40 plus bracket which was expected.

    Now if I am to advise them I will charge the company a fee although the company also feels as I do that why should they educate people who can’t even be bothered to fill in a qnairre.

    Secondly do I feel like advising people that are not prepared to take financial planning seriously and want to put £10 per month into a pension scheme when they earn in excess of £20,000.

    Do they deserve better than what NEST offers?

    For someone who is in the latter part of their career (like many others) do I feel like pushing at closed doors and taking this business on?

    Yes but only because the directors business cross subsidizes to a degree.

    After RDR what will happen?

  13. I misread this article at first and mistook it for a direct quote from the FSA “We need executing”… I love disluzia….

  14. Nic writes a good article when he stops IFA bating.
    I put myself in the “teacher” bracket. Like another adviser, I like to explain to my clients what they are doing and why and the alternatives to ensure they come to the same conclusion that I have with regard alternative options as teachers do NOT always know best.
    The frightening clients are the ones who want you to be their doctor and whether they like it or not, they get the teacher too… luckily for them I don’t charge by the hour as a teacher!
    I agree, the way forward is as per the first poster and he deserves to do well for his efforts and a little free advert isn’t to bad.

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