Episodes 215, 216 and 217 seem to have struck a bit of a chord with viewers and my Twitter mates. In the videos I talk about the demise of accessible financial planning advice for ordinary people in the UK.
Defining mass-market and advice
First I need to define ordinary people. I mean those who have moderate means, say £50k or less to invest, or perhaps £100 per month to put away. Those with more significant means do, and always will be prepared and able to pay for face-to-face financial planning advice from the most highly qualified advisers.
Secondly I need to define what I mean by advice. I admit I find this a bit difficult. I believe that holistic, lifestyle financial planning advice is the gold standard and that everyone can benefit from it. I'm also enough of a realist to know that not everybody needs or wants this type of advice. This will likely annoy the zealots of the financial planning profession, but frankly, I couldn't care less. I'm far more concerned for the UK consumer of financial advice than I am for industry knobs, many of whom have vested interests in pushing their particular brand of how financial advice/planning ‘should' be done.
So advice in this case means the process of fixing some aspect of a person's financial life. It may or may not involve a financial product of some kind…
These ordinary people have historically sought advice either from insurance companies (the man from the Pru) or from banks. Both these sectors are pulling out of offering advice to the masses. HSBC are the most recent casualty, laying off all their 800 or so middle-ranking advisers, leaving only the mortgage and protection guys and the top-flight private banking advisers.
The Retail Distribution Review, coming into force on 1st January 2013 is being blamed as making it unprofitable to offer advice to the mass market. Quality IFAs and financial planners have long understood that some clients are not profitable for us to serve. Some of us serve them anyway, but the cross-subsidy of the ‘bigger' clients helping to pay for the unprofitable ones will no longer work under the RDR.
So if the IFA community can't serve these people, and the banks and insurance co's can't, who will?
The answer has to be the internet. I believe that people will increasingly turn online to self-serve, and the person or company who finds a way to help people with their planning in a similar way to that done face-to-face will win big. The current crop of players aren't there yet. MoneyVista is information only, with no implementation. Nutmeg, which isn't yet live is all about the implementation; it's an investment management service, and what looks like a very slick one at that.
Learnvest, currently US-only, offers access to a CFP professional, albeit by phone and email only. It promises fully customised personal financial plans, catering to the specific planning needs of the user. Awesome stuff, and a real view of the future I think. Still no real implementation though, if by implementation you mean arranging policies or investments.
Will people buy?
There is some contention that financial planning needs to be sold. I agree that this is the case. Most people present to me with a single issue that needs fixing. It's my job to sell the benefits of looking at their finances in the round rather than too narrowly. Those that do this always appreciate the difference it makes. But not everyone goes down this route. Some people come to me presenting one issue and I fix that one issue for them. They're happy, I charged them for the work, and they're in better financial shape than they were when they came in.
Had they gone to a bank they would (probably) not have had the access to full financial planning. If they don't go to the bank in future, and they do turn online, probably the same proportion of people will opt for the financial planning route offered by Learnvest. Probably the same number of people will get their one issue fixed via some online route.
I'll come back to this when my own thoughts are more fully formed I reckon. In the meantime, what do you think? Will people turn online for financial advice? IF so what are the obstacles? Will the outcomes be metter, worse, or much the same as they are now?
Photo Credit: Flickr.com/danielygo