Who needs it the most?

Financial advice is an odd thing. Generally, the best advice is received by those with the most.  The less you have the less able you are to afford advice.  But who needs it the most?  If the higher paid get their finances wrong they don’t go skiing.  If the lower paid get it wrong, they don’t pay the rent. 

The Government have recognised this situation is a problem and have thrown down a challenge to the financial advice industry. The challenge comes in the form of a review – the Financial Advice Market Review – in which the principal aim is to try to get better quality advice to people, but especially the lower paid.

The problem is cost.

To achieve the Government’s aim the advice must be affordable. In the old days a lot of the cost of advice was met by commissions paid by insurance companies to advisors who sold their products.  The risk with this system is that products can seem overpriced (especially when they are surrendered) and advice may become biased – or at least runs the risk of being perceived as such.

So the crux of the problem is how to make quality and affordable advice generally available. 

The review is likely to have implications for company pension and other benefit offerings and may require change to internal systems. We have recently seen huge change in pensions with the freedom and choice legislation for defined contribution pension schemes. A major concern with choice is whether or not it will be exercised in the right way.  The Government has launched the Pension Wise initiative to address this issue.  Users of this service can receive a free thirty minute conversation about their pension options.  They will receive “guidance”, rather than specific advice.

With people increasingly used to (and arguably reliant) on the phone in their pocket for information on almost everything, new technology must play a part in any solution that is found.  But the best advice is personal and bespoke – two things which machinery has difficulty in handling.

The world is becoming a very complex place, with increasing emphasis on individuals to look after themselves.  Irrespective of earnings, people need help to get through the complexities they face. 

Pensions are increasingly high profile both in the press and with the public and the hope must be that this will mean people better appreciate the value they receive from good advice. Logic and economics would therefore suggest that a growth in demand for quality advice will drive supply, especially when the benefits of such advice are seen; and this must be good for all.

For the terms of reference for the review see this link: https://www.gov.uk/government/news/major-new-review-to-radically-improve-access-to-financial-advice-launched

Contact details
Email: Steve Blackmore
Tel:  0121 265 5197