Improving money skills
We must spread the word
Plus ça change. Until recently, independent financial advisers gave advice free – because they made commission on any products clients bought. The Retail Distribution Review (RDR) rules of 2013 changed that.
RDR meant advisers started charging clients a fee for advice. The rules also obliged advisers to do more training and advisers at banks had to recommend more than their own products.
As ever, the law of unforeseen consequences applies. Many pulled out of the advisory business. Now there is an advice gap – but perhaps there always was.
Of course, if financial institutions went back to giving advice, the whole cycle of accusations of conflict of interest could start all over again.
There is a better way – financial education. All financial institutions, I think, have a duty to help people understand finance. And it makes good sense to do so. They have great expertise at their fingertips; telling the world about it will do their reputations no harm.
Advice is undoubtedly essential. A recent Old Mutual survey showed a 53 per cent uplift in retirement income between those who have never sought advice and those who saw an adviser regularly.
This is hardly surprising. Many Britons remain ignorant of investment and finance. Take the trivial matter of how much money you need to retire. According to research, the average person thinks they only need £124,000 to achieve a yearly income of £25,000, including state pension. The figure could actually be as high as £300,000.
Every bank, asset manager, mutual and pension provider has it within their power to do something about this. Most offer simple guides and commentary from fund managers and economists, beginning a journey towards becoming a publisher and a public authority in their field.
They could go further, offering news and commentary daily, just as they would were they a newspaper. Here, financial content marketing has a role.
Tracey McDermott, of the Financial Conduct Authority, says it is a priority for the FCA to see people have good advice and information before making financial decisions.
This is a great opportunity for financial services.