By Fiona Tait, Technical Director, Intelligent Pensions
According to their report there are 3.5 million individuals in the UK who haven’t taken financial advice, but who might be open to doing so, and over £185bn of assets which are held by them.
Given such a huge opportunity, and a potential ‘win win’ situation for both advisers and their prospective clients, the obvious question is why haven’t they taken advice?
Royal London have addressed this question in a fair amount of detail in this and previous reports but it pretty much boils down to the same 2 key issues which affect any service proposition:
• Clients must want the service enough to pay for it
• Advisers must be able to profitably deliver it
Clients have to see the benefit of taking advice
Royal London previously identified the 6 key reasons why consumers are reluctant to take (or pay for) financial advice. In a nutshell these reasons boil down to the fact that unadvised consumers don’t know what we do, they don’t know the value we can add, and they don’t trust us to deliver it.
Advisers know this, and yet are amazingly reluctant or unable to do anything about it. The current report found that 57% of advisers believe there’s a need to provide education about the benefits of professional financial advice but only 19% offer it. Clearly there are some good reasons for this, advisers are generally not looking for things to do and servicing their existing clients must come first but this could surely be improved.
If advice firms can’t manage it perhaps there are other bodies who can including, ideally, some independent bodies who have no ‘skin in the game’.
Advisers have to be willing to take on new clients.
You might expect this to be a no-brainer but according to the report only 42% of advice firms are actively looking for new clients, which is a long way from the commonly held belief that financial advisers are always looking to sell you something. More predictably, the earlier research also found that on average, consumers need £48.6k to invest before most advice firms would consider taking them on as a client.
The fact is that it takes a lot of time and expertise to manage a client relationship, and a lot of the work is done up front. The volume of work associated with taking on a new client means that it is simply not cost effective below a certain value and many advice firms prefer to concentrate on new opportunities with existing clients.
Clients are already reporting difficulty in finding advisers willing to take them on and many more simply don’t know where to start or are concerned that they won’t be able to distinguish a ‘good’ adviser from a ‘bad’ one.
Solutions
Given the size of the problem it is unlikely that any one solution will be sufficient to tackle it, or that any one part of the profession can solve it on their own.
Financial education in schools will help however at that stage the knowledge is likely to be purely theoretical rather than practical. Workplace solutions can provide more timely support and reduces the trust barrier but of course not all potential investors are employed. I had, and still have, great hopes for the Money and Pensions Service (MaPS) but unfortunately while feedback is predominantly positive, take up remains extremely low.
The FCA are reportedly looking into a ‘guided sales’ model which would cost less for advice firms to deliver, and which could form part of chain of steps towards full financial advice for those who need it. Another great idea, but it has been looked at before without much success.
In the meantime, I urge advisers to do the best they can to demonstrate the value they can offer and employers, trustees and guidance services to support the idea that having a long-term plan – financial or otherwise - is always likely to provide better results than no plan at all.
|
