Regular readers of this column will know that I do return to topics where it merits further comment. Personal accounts merit almost a quarterly mention just in case they sneak in with no more amendments.
Paul Myners’ recent comments that people losing out where pension credits cancel out savings under personal accounts compares with people being belted up but injured in a car crash reveals what can only be described as breath-taking complacency or mathematical incompetence. I just hope it is the latter.
Topping up state pensions is fine but when savings are a deductible, we will have an even more deluded public in future.
While we are on the topic of saving, tell me why it is that bank compensation is still is less than ours. Even worse, unless you know the structure of the bank, you will not know if it is £35,000 all in or £35,000 per brand. This detail is very important yet it is as easy to find as pension credits are to understand.
We have financial news that few understand and yet there it is pumping out night after night. Everyone knows the word sub-prime but how many understand it? We have investment bankers allegedly falsifying their positions to make bonuses and the bank is considering what to do. I have news for them – it is called fraud.
All of this puts money guidance into perspective. People certainly need information but they also need confidence in the various benefits offered by the Government. Where they lack integration, we are not treating people fairly at all.
Talking about the competency of the Government to make sensible policy takes me to the thorny subject of adviser competency. Fund selection is one area where I think this is particularly problematical. I despair when I see clients where their assets are split over a multitude of funds and all too often past performance is the only criteria used.
Monitoring 30 to 40 funds to perform due diligence is not something that I expect from the smaller IFA, yet we regularly inherit clients where the fund mix has not been revisited since inception. Using lots of funds may seem impressive but it certainly adds to the cost and may not produce the desired effect. We must start to consider exactly what skill we add to the client relationship and this must be based on tested competence and not just strongly held opinion.
I would contend that, for most of us, a career as an investment manager does not beckon, so why do so many IFAs kid not just their clients but themselves as to the extent of their knowledge and ongoing monitoring?
We need to focus on people managing their lives, where products, underlying investments and wrap platforms are merely the facilitators and not the direction determinants.
We need to recognise that the move to fees needs more than a financial shift. It is a change in mindset, the latter being the real challenge. We must ensure that implementation is truly separated from advice in the way we talk to clients.
For many, this will resemble walking on a tightrope without a safety net but then that is what life in general must seem like to many people.