I’m playing a slightly bad-tempered part in a discussion group on Linked In at the moment. (It’s here if you’re interested: https://www.linkedin.com/grp/post/8304605-6006301435883507713.)
The group is all about how mass-market people can get the financial advice they so desperately need at affordable prices, and as you’d expect I’m arguing that mass-market people don’t desperately need advice, what they desperately need are financial services designed to make sense to them without advice.
No-one else in the group agrees with this. Other contributors may have their own views about how affordable advice can be provided, but all are certain that provided it must be. (And not just for really complicated stuff – one contributor tries to make his point about the need for advice using the example of a young family buying term assurance.)
I don’t want to repeat all my arguments against this position here. But my overall feeling about the discussion as a whole is that it’s quite amazing how the perspectives of everyone taking part are so massively conditioned by their experience of the Advice Era during which they’ve led most, if not all, of their working lives.
Taking the proverbial step back, it’s undeniably true that pretty much everyone makes far more important, riskier and often more expensive decisions without any advice at all. They choose homes to buy, schools for their children, career paths, people to marry, and no-one seems remotely concerned about this.
But when it comes to a DC pension worth £30,000 on average at retirement. or term assurance with an average sum assured of under £100,000, people conditioned by this industry are horrified at the prospect of consumers making any kind of decision without advice.
I’m sure this is mainly because they just can’t imagine how these decisions could be simplified and brought within the scope of consumers’ capabilities (although as far as the term assurance example is concerned, they don’t have to go much further than beaglestreet.com to find out).
(I think it’s also to some extent because of what’s become an embedded fear of the regulator: no-one cares if people choose a terrible house and make hundreds of thousands of pounds less than they might have done, but if they can’t be shown to have bought the most suitable £100k’s worth of term assurance on the market then someone’s head will have to roll.)
My own position is not as absolutist as it may appear in the group. I accept that some ordinary people may sometimes suffer from horribly complex financial problems which just don’t fit in with the simplified world I’m imagining, and there’ll certainly be a continuing need for advice to help them. This is particularly likely for some years while people still grapple with products they bought during the Advice Era – having worked in this industry for 30 years I don’t understand my pension statements and need someone to explain them to me, and I know I’m very far from alone. And once a range of sensible, simple, accessible, decent self-serve options are in place, if some consumers still think it’s worth it to pay the going rate for whatever kind of advice appeals to them, that’s absolutely fine by me.
I have to accept that my position does involve acknowledging that in a self-serve world, many people will come away with more or less sub-optimal outcomes.That’s what happens when people choose things. I come away with sub-optimal outcomes all the time, whether I’m buying a leg of lamb in Waitrose or a four-bedroom house in Camden Town. There is no consumer market in which all, or even the large majority of consumers make the best possible choices.
(BTW, there has never been an intermediary market in which all or nearly all consumers get the best possible outcomes either – a combination of intermediaries’ lack of expertise and diligence, commission bias and the sheer unpredictability of financial markets has always seen to that.)
But anyway. As I say, I don’t want to repeat all my blatherings from the discussion group. I just want to highlight the way that a bunch of thoughtful, intelligent, experienced participants simply cannot see beyond the way things are to imagine how things could be.
It doesn’t matter that half a dozen people in a LinkedIn group have this problem. But it does matter that about 99% of the people in our industry do.