Where to turn to when you find yourself in need of advice
PUBLISHED: 09:58 25 October 2017 | UPDATED: 10:02 25 October 2017
Searching for some very specific financial information recently, I emailed a pal (an IFA of many years' standing) and asked him if he knew anyone who could provide it. Within minutes, he pinged back the name of a firm and a link to their website.
I remain fascinated by the manner in which the internet facilitates the rapid exchange of information, for it reminds us how technology benefits hundreds of millions of people.
Nevertheless, whenever someone sends you a link they’ve visited, you can easily find yourself meandering through the ether, leaping from one link to another and happening upon interesting articles, theories and ideas. On this occasion, however, I had no time for the online equivalent of a stroll in the park, so instead went directly to the link provided by my mate where I came across one of the worst website introductions I have ever encountered.
It was so unbelievably bad, I thought it was a joke and then wondered whether it had been authored by a poorly-educated eight-year-old. I won’t embarrass the company by naming them, but I’ve reproduced below their website’s introductory paragraph:
“This firms core business is the management of clients financial wealth across a diverse product range including but limited to Cash, National Savings, ISA’s, Unit Trusts, Insurance company products such as Investment Bonds and other investment vehicles.”
Who checked this and signed it off prior to publication? The haphazard omission of commas, apostrophes and whole words, coupled with the equally ridiculous inclusion of an unnecessary ‘greengrocer’s apostrophe’ and capital letters is bad enough. However, we should bear in mind that these are the opening lines web browsers come across when they’re considering doing business with this firm.
If a firm of financial advisers hasn’t checked whether the basic grammar appearing on the front page of its website is correct, it would make me wonder about levels of sloppiness elsewhere within the firm.
No, I’m not being pedantic. Advisers at the firm might be the most competent bunch you’ve ever come across, but you wouldn’t know it from their internet-based ‘shop window’.
It certainly put me off getting in touch and I have no doubt that others have felt the same way.
Which brings me onto financial advice.
Four years ago, the Retail Distribution Review (RDR) effectively banned financial advisers and wealth managers from taking commissions from fund managers and insurance companies when recommending their products to clients. The aim of RDR was to improve professional standards and to ensure that advisers gained additional qualifications.
With lucrative insurance company commissions banned, however, many advisers, justifiably, had to start charging clients for their services and advice, so falling into line with the rest of the financial services industry that has always charged for similar services.
However, the problem for advisory firms with regulators trying to improve standards and transparency by introducing new rules and regulations is the significant increase in costs they incur.
In other words, with commissions banned, the cost of servicing clients has increased markedly since the RDR and this, in turn, has had an unintended consequence: what might be called the ‘wealth advice’ threshold has risen too. In an increasing number of instances, it simply isn’t worth a firm of financial advisers taking on a client whose net assets are less than, say, £50,000; in some cases, the client’s minimum ‘net worth’ has to be £100,000.
READ MORE PETER SHARKEY HERE.
Furthermore, post-RDR regulations have not only driven up costs, they’ve also resulted in an exodus of advisers from the financial services industry. Many who were close to retirement or unwilling to study for and then sit exams have left in their droves. The result, according to AXA, the insurance company, is there is now only one financial adviser for every 2,700 people in the UK. The comparable ratio in Australia is one adviser per 1,400 people; in Hong Kong it’s one per 156.
Last year, the FCA-commissioned Financial Advice Market Review recommended ‘intervention’ to help the financial services industry develop cost-effective ways of delivering advice. The FCA estimate that around 5.5 million people are prepared to pay for financial advice, although by implication, some 14.5 million are either not, or are unable to do so.
The nation’s financial literacy is abysmal – and not just among consumers. Perhaps if some firms of advisers applied basic rules of English grammar to their advertising material, consumers would be more comfortable trusting them with their hard-earned.
Alternatively, forward-thinking advisers, who recognise the potential for welcoming the millions of individuals within the 14.5 million unadvised people who might be deemed ‘future wealthy’, may consider offering some form of ‘loss-leading’ advice service in the expectation that it will provide a return on investment in later years.
Closing the ‘advice gap’ is important for both the financial services industry and the millions of unadvised, future wealthy cohort who may only need pointing in the right direction when it comes to investment.
RDR may have improved standards, but it has also created a widening advice vacuum.
THE WEEK IN NUMBERS
Percentage of people unemployed in the UK, the joint-lowest level since 1975. The Office for National Statistics report that an additional 94,000 people found work in the three months to 31st August.
Height, in metres, of the world’s tallest Liver Bird, hoisted into position in Liverpool. The sculpture is made from Meccano in homage to the Liverpool-born toymaker Frank Hornby and the city’s first Meccano factory.
Estimated value of a gold, diamond and art deco pendant lost by Lady Somerleyton when she went shopping in a Morrisons supermarket in Lowestoft. The former Lara Bailey popped into Morrisons while on the school run wearing what is described as a ‘priceless family heirloom’ – as most folks do.
Percentage fall in the number of divorces in the first five years of marriage since 1991. Less pressure to get married has ensured that more couples are reaching their fifth wedding anniversary than at any time since 1973.
Year in which Mary Ann Brailsford planted a pip which became the first-ever Bramley apple tree, though the tree didn’t bear fruit until 1837. It is now in danger of dying which has prompted Nottingham Trent University to step in with the intention of buying the cottage where it stands and saving it from the incurable honey fungus infection.
New emergency hotline number due to be established for victims of bank fraud. People will be able to report scams and illegal money transfers after the recorded numbers of bank fraud cases rose to 5,000 a day.
Peter Sharkey read economics at the University of Bristol. He worked as an accountant on three continents and has been a company director and investor for more than 30 years, building and selling three different companies.