Wednesday, 30 November 2011

66% of families are shocked at the size of their household outgoings - working your way towards a brighter future

For those who are new to my blogs, welcome. You may be asking why I have started with exploring the concept of financial management. The reason is simple I believe that unless your day to day finances are under control then you cannot even consider financial planning. The IFP recently released some worrying statistics showing over 50% of men and women worry about money. For financial planners we need to be aware of this especially where income drawdown under the new rules can see income being cut by 30% plus and annuity rates plunging.

Before I look at the second part of my blog I came across across these statistics on the “your money update”:

  • 57% of families say that have been affected by the economic downturn
  • 68% reckon the recession has left them with less money in their pocket at the end of each month
  •  66% of families are shocked at the size of their household outgoings

Although I talk about debt which is a worry for some people, we need to understand that our clients may be struggling with reductions in income or just increases in cost and this is where knowing the concepts of financial management is so important.

When I talk about financial management, I find the hardest thing to deal with is the unexpected. This can be the changes as a result of the budget (or autumn statement being topical), rises in fuel costs, or just those unexpected costs like an expensive car repair bill. Certainly this has to be part of general financial management which is to have a slush fund for the unexpected but first we have to work through the day to day management.

In my last blog I explored the general starting point of identifying all income and then outgoings. Often what we can find is that outgoings are greater than what is coming in. What I don’t want to do is go into too much detail around debt because as I have said before I am not an expert on this but if someone is in this position then they should contact charities like CCCS or CAP UK who can help.

When looking at the financial statement what needs to be done is to prioritise the right things to ensure an acceptable standard of living. Below are some thoughts on what may be classed as acceptable costs, and how to approach any potential savings:

Weekly costs

  1. Food and household – this depends on the number of people in the household but for a family of four, this can be in the region of £100 - £110 per week. It doesn’t sound a lot but I remember hearing that if you plan your meals in advance and buy only what you need this can significantly reduce your cost
  2. Car and travel costs – we are very lucky because we live close to a city so we can cut down on fuel costs, so our budget is £20 per week for fuel. We don’t take public transport and use bikes to get around where possible. So this is very dependent on your circumstances 
  3.  Living expenses – consider what is reasonable per week; within this consider leisure activities and general daily expenses. Remember where cutting down outgoings then certain things will have to go. So this could be in the region of £50 - £80 per week – or it can be less where the belt needs to be tightened further
Monthly costs

  1. Regular payments – I am a great believer that any regular payments like gas, electricity, phone, water etc should be paid by direct debt. In a lot of cases there may be no additional cost for doing this but even if there is then it may be worth doing just because it is easier to manage outgoings
  2. Debts – speak to registered charities that can help manage debt payments but the key is to pay down these debts as quickly as possible. They will help come up with a repayment programme which  can be built into the budget
  3. Monthly payments which I think can reduced – although you can reduce your gas and electricity bills by switching I believe the difference between companies is very small, where I target tangible reductions in monthly bills are: 
  • Landline and mobile phones – if you are coming to the end of the contract then negotiate a better deal. To provide some examples, although it is nice to have a swish phone you can get sim only contracts for as little as £5 per month, likewise from experience you can do deals with your landline and broadband provider to significantly reduce your monthly bill (I recently reduced this by £10 per month)
  • Building and contents insurance – I have never been a fan of comparison sites but actually insurance companies expect us to do nothing at renewal but I would argue that you need to look around, I recently reduced my monthly insurance by 50% and now have better cover
  • Cable / satellite TV – I have always seen this as a luxury, this can be reduced significantly if you take free view or reduce your package
  • Life insurance and other insurance cover – this is where a financial planning can help significantly, find out what is needed and then see if you can get cheaper deals. In a lot of cases if the same benefits can be found on the NHS then why pay for private cover; certainly at this stage I would see this as a luxury. As a little bit of controversy I would say at this stage anything like pension planning and future needs may need to be put on hold whilst the plan is put into place
  • Gym membership and other leisure activities – for many these are the one release they have from everything however these can be expensive. So reducing these costs has to be an area to target
There are of course monthly payments which are harder to change but checking to see if there are better deals can reduce costs:
  • Mortgage payments – for those with mortgages, it may be hard to re-mortgage but it is worth seeing if payments can be reduced. Obviously with rent this is harder to do 
  • Child care, school costs and maintenance support – these are fairly fixed costs so there is always little movement on these but school costs can be targeted
  • Other costs like TV licence, water costs etc are unlikely to provide little options for reductions
Yearly costs – budgeted for monthly

  1. We have costs which happen throughout the year but unless we budget for them then we will struggle to pay for them. Below are some ideas and it may be that some of these are reduced or removed 
  2. Holiday – we all like our holiday but in reality if we are spending £2,000 a year on a family holiday (including spending money) that is £166 per month, can this be reduced?
  3. Household maintenance / slush fund – this is worth having but be realistic on what can be afforded and what is expected to pay out 
  4. Christmas and Birthday – work out how many presents are needed and set a budget for each person (including family), also build into this any cost of children’s parties and the cost of entertaining for Christmas. It is interesting to see so many people don’t actually do this
  5. Clothing / footwear – think through the costs, remember certain items like children’s shoes are expensive but charity shops can reduce these costs significantly 
  6. Car maintenance – so MOT, insurance, maintenance and breakdown costs
Once the process is completed and cut backs where appropriate have been made then hopefully the outgoings and income should balance. This part of the process is perhaps the hardest, particularly where there is significant debt to pay back, but the key has to be to reduce down that debt.

This is not an exhaustive list but hopefully it starts to open up the thought process. Some people reading this will be financial planners, but whether you are a financial planner or not, have a think on what works for you and share these thoughts.

In the final part of these series of blogs I will look at how you set up and manage these payments. I will then move onto the concept of financial planning.

Follow me on Twitter so please spread the word and lets change the world.

Monday, 28 November 2011

The first steps towards financial planning

In my last blog I implied that one of the biggest barriers to financial planning is financial management. If you can’t control your monthly budget then the idea of a long-term financial plan seems crazy. Often we skirt over the monthly budget and actually as we struggle daily our long term outlook gets worse.

I go back to what the IFP (Institute of Financial Planning) was saying about how many of us worry about money, it is a frightening statistic and actually when you hear so many people saying that Christmas is cancelled this year there is a general air of pessimism. (Although, to be fair Christmas cannot be cancelled - just perhaps the giving of presents!!!).   

So how do we tackle our monthly budget – I want to explore the basics of financial management and with this blog I want to start at the very beginning.

Knowing what your monthly income and expenses are

I recently spoke to a friend who was going through this process, and he found there were payments he was making that he had no idea what they were for. So, although this can be hard this is the first step.

So here is my summary of how to approach this:

  1. Find time, this will take more than a quick ten minutes!!!
  2. Draw up a blank financial statement – there are various examples of these, and you can produce one on an excel spread sheet, or word. Personally I use an excel spread sheet. To get you started it is worth looking at this budget planner on the Money Advice Service (click to view), or you can find examples on the CAP UK website (click to view) and also IFP (click to view).
  3. Find all your financial paperwork, this will include bills, bank statements, wage slips, benefit letters and any statements of bills.
  4. This is a personal thing, but whether your money comes in weekly, fortnightly or monthly always view it as a monthly payment. For weekly or fortnightly payments convert these into monthly payments for the purposes of the calculation. CAP UK use a simple calculation for this, for weekly it is a factor of 4.33 (i.e. £100 per week x 4.33 to get the monthly figure), and for fortnightly 2.165.
  5. Enter all the money coming in on the financial statement you are using. Sometimes we receive irregular payments like overtime and bonuses, because these are unknown amounts I tend to ignore these because these are not guaranteed. However, if you get known regular amounts then take the last 12 months and divide the payments by 12.
  6. List what you spend each month or week on everyday living and essential bills. In all cases work out weekly or fortnightly amounts as monthly calculations. This varies depending on the tool you use, for example CAP UK ignore things like cigarettes, alcohol etc whereas others go down to the smallest detail. Personally for the weekly outgoings, I focus on just three areas – food, fuel for the car and spending money (so this covers anything like going out etc).
  7. In considering your everyday living and essential bills remember to include irregular expenditure or monthly payments. This is really important – monthly payments are likely to include things like your gas and electricity, cable services etc and irregular payments are things like birthdays, Christmas, road tax, car MOT and maintenance etc. So think of everything you spend throughout the year – we tend to cover clothes within this as well as school trips so be honest on this.
  8. If there are payments going out that you don’t recognise then call the company and find out what they are, if they are not essential then you may wish to cancel these but I will look at this in more detail in my next blog.
  9.  Debts – the recommendation is that you list your priority debts.  I will not pretend to be an expert on this, one charity I have seen that may be able to help is CCCS (Consumer Credit Counselling Service) – (click to view). But the general recommendation is that you list all your creditors and you find out how much you owe, call them and ask the question explaining you are struggling to pay down your debts. Don’t agree to any repayments when you call as this is where people like the CCCS can really help. Priority debts are classed as rent / mortgage / secured loans, court fines, council tax, maintenance / child support, gas / electricity, water, benefits overpayment and hire purchase. Non propriety debts are any other debts so credit cards, loans, over drafts, store cards etc.

Hopefully what you now have is a list of income and out-goings as well as details of any debts. The next step is to make the financial statement balance. In my next blog I will look at this in more detail.

Follow me on Twitter so please spread the word and lets change the world.

Sunday, 27 November 2011

Financial worries – a mental wall to achieving our goals

In these blogs I want to look at financial planning and why it is important to achieving your lifetime goals. However, as I know from experience these goals can be unachievable if we are not in control of our day to day to financial commitments. 

In a way this is the first step or goal to a good financial plan, and possible a financial adviser will not be able to help with this stage of the process. This is where organisations like Consumer Credit Counselling Service (@moneyaware / @CCCSPressOffice), CAP UK (@CAP_UK) etc can really help. 

I have listened to a lot of discussions over the last few weeks where people are worried about their jobs, their money and actually whether they can afford presents for Christmas. But on a more basic level there are people in the UK who cannot afford food.

Last week the IFP (@IFP_UK) during the Financial Planning Week Campaign (#FPW2011) realised press comment which said an amazing 66% of women worry about money and 54% of men. 

So I think it is fair that for this first series of blogs I look at Financial Management. To paint the scene I want to give you a case study of how financial management can be achieved and how it can help. 

In 2000 our family income dropped by 50% (my wife stopped working); however we had planned for this and had a fairly large lump sum of money in the bank. Our problem was that we continued to spend at the same level and within about six years the money had gone and although my income had increased slightly it had not replaced the drop in income. 

We ignored this still trying to save for retirement and actually failing because we had to keep cancelling policies to get more money. In 2008 we went on a Financial Management Course which has transformed our lives even to the extent that being out of work for six months in the last three years we have been able to cope. Today my income is at the level it was when our income first dropped in 2000. 

I am not going to say what we have done over the last three years has been easy and actually there are times when it has been very hard but what I can say is that our financial management is under control and that the first goal has been achieved. We are now in a position to look at long term financial planning goals. 

So before I move onto financial planning, I want to provide some practical tips as to how we approached this, how this goal can be achieved and how it can help in the ultimate goal of having strong and robust financial plans. 

What is important to understand is that over the last twenty years we have moved from a generational society who understood this concept to a society where we can have instant gratification, and actually we need to come back to a position somewhere in the middle because if we don’t then the young people coming through will have no idea how to manage money. My approach is not unique and is taken from others, so please share your tips as well.

Follow me on Twitter so please spread the word and lets change the world.

Thursday, 24 November 2011

#FPW2011 has started a financial revolution let’s keep the message going

I love this quote “be the difference you wish to see in the world”.  

When I started this campaign last week I had no idea that it would gain the following it has, but one thing I would say is that I am passionate about this and if we can make a difference then let’s go for it.

I loved the analogy used by Martin Bamford (twitter @martinbamford) that said RDR demolition was needed to rebuild the industry. For the industry this is important but outside RDR means nothing to many people, so although it will be good for the industry we need to get a different message out there that builds from these changes. I believe this is a massage built around financial management, financial planning and investing.     

For the final blog of the week there are some things I want to reflect on. 

Firstly most of you are old hands on twitter with hundreds of followers, you all have a voice to your followers and I don’t want to take this away from you. What would be good is if we could combine all these followers under one roof and get this message out to a wider audience? You have access to journalists, trade bodies, regulatory bodies, other IFAs and consumers and these are the people we want to talk to, and get feedback from. So please if you can encourage them to follow this campaign that would be fantastic. 

Secondly some of the feedback I have had is very positive, and I would like this to become a central place where people can share what they are doing. If someone is doing a good job in Cornwall or Scotland lets share this across the country. 

This week I met someone who was trying to say at the centre of any good financial adviser business is profit, I fundamentally disagree with this. At the centre of any good business is the customer and the service proposition, growth and profit stems from that. 

What I have seen from the people following this blog are businesses focused on bringing financial planning to people in innovative ways whether through workshops, videos, twitter or a combination of ways. Now this is exciting and follows the theme of educating.  So let’s encourage people to focus on the customer and service proposition. 

And the end goal well it is clear we have a generation who are not saving, or not saving enough.  If we can change this then we will have achieved something i.e. we can be the difference we want to see in the world. 

I don’t want to bombard people with blogs so I will focus on three areas (and in this order):

  1. Financial Management
  2. Financial Planning
  3. Investing
If you disagree with anything I say or think of better ways of doing what I suggest then join in. I may pick up on ideas you have been tweeting about but hopefully enough will be said between the followers. If this grows enough, then we can start to knock on the doors of schools, colleges and universities and make that long term change. 

And finally thank you to IFP (@IFP_UK) and all those who got involved with #fpw2011 what a great campaign, as well as all of you who have followed me, commented and retweeted. 

This is just the beginning, it is is in our hands do we drive this forward to greater things, let’s continue to use the hashtag #fpw2011 and make that difference. 

Have a great weekend. 

Signing off, the Dandy Highwayman

P.S. Follow me on Twitter so please spread the word and lets change the world.

Wednesday, 23 November 2011

Making a small step towards a big change

Financial Planning Week is I think making a lot more noise than perhaps we appreciate, and to be honest talking about Financial Planning is not necessarily a news winning story. However, a few things have caught my eye today which I want to draw out:

The debate on charges

There are several stories on this perhaps generated by Hargreaves allowing investment in passive funds and investment trusts but at a cost, and then the argument about how cheap passive funds are against active funds and then how much is a fair charge.

I also saw tweets from “This is Money” saying savers are paying £3.1 billion in hidden charges.

Unfortunately this noise is distracting and actually as many of you who are following me have said actually what we need to see across all distribution channels are clear transparent and simple charging structures.

This led onto a second debate on what is a fair charge, someone tweeted is charging £25,000 for a scheme that saves £100,000 in tax fair. My answer to this is it depends, I know that is sitting on the fence but a legitimate scheme that means you have £75,000 in your pocket may be worth it but care is needed – firstly is this legitimate and if it is are there cheaper and simpler schemes to do this.

So if we can get clear and simple charging structures across all distribution models then I think that is fundamentally an important step in providing a positive image to investors.

You can then test the proposition against – price is what is paid, value is what is received.

Timebomb for Britain’s long term financial future

I touched on this briefly in my last blog, what I want to do is go out and talk in schools, colleges and universities about  financial management, financial planning and finally investing because if we don’t do this then the problem we have now is only going to get worse.

I want to pull out some points from the press release from the IFP:

  1.  Only 19% - just one in five people – believe that they are saving enough for their future needs
  2. Almost half of Brits are not confident they’ve saved enough to live comfortable when they retire
  3. 14% have never made any pension contributions, and a further 31% are not currently contributing to a pension plan of any sort
  4. Two thirds of women and over half of men say they worry about money either always or most of the time
We should be scared about this, we have an expectation that we will retire at 65 but in reality this is becoming less likely and in reality we have to accept that we are going to live a lot longer past age sixty five.

What I thought was encouraging was that 46% of people had drawn up financial plans. And this is what I want to focus on; financial planning is a key element of the process. I can set up a financial plan but is it realistic; I may want a big house in five years’ time and put £20 a month a side to achieve this.

Going back to the timebomb if the middle generation are not saving then the younger generation coming up are certainly not doing anything because they have no role models.

Elements to a Financial Plan

On a simplistic level it:
  1.  Provides direction and meaning to your financial decisions
  2. Considers the whole picture, so one decision impacts on another
  3.  Enables you to consider both short and long-term goals as part of your overall life goal
  4.  Enables you to adapt more easily to life changes
  5. Makes you feel more secure that your goals are on track
Now you can do this yourself, but this can be daunting because actually you have to take hard, cold and detached views on whether your goals are realistic. Going back to the debate over Hargreaves and the Fidelity China Fund, we have two parts of the brain an emotional side which reacts first and a more logical side. Often the emotional side reacts first and we rush headlong in, Hargreaves say this is a good idea so it must be. Our logical brain would try to break the investment first before we invest.

So what am I trying to say, the press want sensational stories and actually financial planning is dull when compared to clients suffering hidden charges which is much more interesting, now hidden charges are important but the FSA are doing something to change this so let’s hope they get this right so let’s park this and focus on something that is fundamental to all of our futures. That is getting out there and telling people why we need to get people to understand the importance of financial planning, I know it is nice to have a new car but that can wait.

I would love this debate to go into parliament and for the politicians to wake up to the fact that actually the financial problems we have now will only get worse if they don’t act today.

As always thank you for your support, you are my runners, you have the contacts, get journalists, politicians, trade bodies, IFAs etc to follow us on twitter and make that difference because in ten years’ time you can look back and say you were part of that generational change and be proud of what you have achieved.

Follow me on Twitter so please spread the word and lets change the world.

Tuesday, 22 November 2011

How do you change the world?

When I started this campaign I had no idea that the IFP was starting a Financial Planning Week (follow on twitter @IFP_UK and use the hashtag #fpw2011). This event has been incredible encouraging and generated a lot of press comment and acting as a showcase of how financial advisers operate today. Well done to all those involved. But what I haven’t seen are other financial adviser trade bodies (and I can name a few) getting involved, my challenge to them is that this campaign involves all of us and the more we all go out and talk about this the more likely we are to get our message out to a wider audience. So that is our challenge let’s get others involved and get this campaign going beyond a week to a complete change of mind-set.

Away from this I have followed a number of tweets and articles but I want to focus on two from Jeff Prestridge on the website (follow on twitter @jeffprestridge):

My financial epiphany: How a friend convinced me sensible financial planning can pay

This article / blog brilliantly summarised why you should consider financial planning – I think what was interesting was that only 46% of people have a financial plan and of those only a few use a financial planner to achieve those goals.

There were two comments which summarise to me what people think of financial advisers:

‘I know a man who can look after this money…’

‘Never trust them’

Whether tongue in cheek or real it shows a lack of understanding of why you should consider a financial adviser / planner and this leads onto the second article / blog.

Don’t forget who were the biggest promoters of the failing Fidelity China Fund – and what they earned

Firstly before I launch into this I like Hargreaves Lansdown and admire what they have achieved where others have failed. However, I think there is a danger that they can become a victim of their own success. Let me give you a true story of a friend who recently received an unsolicited letter from Hargreaves promising free sweets (well a nice pen) if they moved their money to them. Very tempted because they had a poor performing pension they completed the paperwork – now consider this:
  1. I was asked if I thought Hargreaves Lansdown were a good firm, my answer was yes. I have my investments with them
  2.  I asked them if they knew where they wanted to invest their money, what they wanted to achieve etc and they said no
  3.  I asked them what they were going to do – easy was the response they would take “advice” from Hargreaves Investment Times
Now Hargreaves Lansdown will say that Investment Times is not advice but I understand that fund houses go to Hargreaves for new fund launches because of the influence they have on their clients and that they know that they can get tens of millions into a new fund launch. So if my friend does take their “advice” and the fund underperforms who do they blame? Well actually they only have themselves to blame despite feeling that Hargreaves has influenced their decision.

You see the premise is that the 300,000 clients that Hargreaves has are financially astute and have a financial plan in place. This may be the case and many may have a financial plan but I suspect there are many who don’t. In fact if you have a look at their financial report and accounts the average case size is only £40,000 which to me suggests that there are many people who are not financial astute with small sums invested and therefore turn to the “advice” provided by Hargreaves.

What worries me is that Friends Life and others are now launching products direct to the public and with a growing middle market of unadvised people I am worried we are facing a future time bomb of disgruntled investors looking for someone to blame for their mistakes.

The FSA, ABI etc etc are busy trying to tidy up the industry and missing this unexploded bomb, where they need to start is by getting people to understand the importance of saving and this is where financial planning comes into being.

What we should be doing is getting people like the FSA, ABI, Government, Journalists, IFA trade bodies and consumers together and explaining why financial planning is important.

My one hidden agenda is that I want to go to schools, colleges and universities and talk to students about the importance of budgeting and financial planning because if we get people to understand it young then we can create a generational change. Once we do that, then people can make decisions on whether they achieve those goals through the likes of Hargreaves or by going to a financial planner.

So back to the question I started with but slightly changed – ‘how do we change people to see the importance of financial planning?’ – one small step at a time.

As I said in my last blog I will be emailing trade bodies, government and really anyone who will listen but please tweet the message increase the followers of the IFP, my followers and anyone else who supports this campaign. And just in case I have no connection with the IFP, in fact I haven’t even met them I just think they are doing a brilliant job.

Follow me on Twitter so please spread the word and lets change the world.

Monday, 21 November 2011

Let’s start a UK financial planning revolution……

Last week I started my campaign to start a UK financial planning revolution, and to date I have a small group of 50 plus followers who are, I hope, intrigued by my battle cry. Perhaps there is a question around my motivation, who I am and what I want to achieve. This blog I hope will expand on this further, and my aim is for this to be posted onto the FSA, ABI, government, trade bodies, journalists and anyone else you think should get involved. 

This is not one person’s mission but one which you can all get involved with; if you don’t agree with what I write, or you have different thoughts then let me know. You can send me a message and I can send you my email address and I will never disclose your details unless you want me to. Or you can simple respond to the blog or tweet.

To get involved spread the message and help increase my followers, I can send this message to the FSA, ABI, government etc but if there are more people you want me to contact then let me know. 

A generational change  

Generational changes in financial services happen once in a lifetime and provide an opportunity to make a massive difference. In 2013 one of these generational changes is set to take place. This provides fantastic opportunities; however, we are missing one key ingredient to this change which unless addressed could make the whole exercise pointless. 

My challenge today is simple, as part of the changes that are being driven through by the government, Europe, FSA etc etc let’s take a step back and consider what we want to do in Financial Services. 

I have read a number of papers and comments over the past few weeks and have observed the following:

  1. The ABI in their quarterly paper focus on product sales as the key to financial advice
  2. The ABI in the same paper seems to think that advice from 2013 will have to be paid for by hard cash
  3. The FSA has spent years putting together RDR with the aim to increase trust amongst consumers and provide access to advice for the masses (the last point is one that the FSA have confirmed they will miss as this stage)
  4. And more recently it is becoming clear that people are not saving which will create a long term problem
The solution seems to be a fixation on simplified products, more regulation and a great deal of confusion.

The essential ingredient which I believe is missing is simple; the concept of financial planning. Clearly the focus for the ABI, FSA and as a natural consequence the government who take their lead from these parties is product driven. This is an outdated concept from the eighties. In the last years I have met a new generation of financial advisers who have built up sound practices where the focus is on financial planning, and are supported by modern thinking solution providers (whether a platform or other support)

A concept which I will expand on throughout my blogs but seems to be lacking from the minds of many key influencers in driving change. Financial planning is about finding out about goals and aspirations first and putting the product last (i.e. as the solution to delivering the goals). And what is important is that people / consumers see financial planning as the hub of the wheel which facilitates the components to deliver the solution.  

Before I continue I accept that some people can do their own financial planning and this is why we have to have direct / non advised operations but I think for many if they don’t get this concept then they will be disappointed at some point of their journey because an adviser can provide an impartial and rational view point. 

It is my aim to get this message out to the FSA, to the government, to journalists, to trade bodies as a challenge. Are we prepared to get a positive and important message out to the public, because if we don’t we are going to miss one of the most exciting opportunities we have. 

Consequences of doing nothing

Not only do I want the influencers to think differently but I want to go out to schools, colleges and universities and talk to our young people about financial planning and why it has to be considered and also about the idea of investing (that is for another day!). Financial planning is not just about long term needs but it should also cover day to day financial management as a key starting point. If we don’t get the message to these people now we are going to have a whole generation who join the ranks of the unknown. 

The IFP has already started the process but we need to go further and start a financial planning revolution in this country. I started the campaign to demystify financial planning just last Thursday and now have over 50 followers on twitter there is clearly an appetite - the bigger the names and bodies who get involved the more likely we are to make a change.  

We are so keen to impose regulations / ideas and paperwork work when actually the message is very simple – we need to create a service proposition which is transparent, simple and at the heart of it sits the client. (Sorry I did adapt this from one of the messages you sent last week!).

If we don’t do this then I believe the FSA will also fail on their first aim as well and that financial planning will stagnate and fall away leaving access to advice to the few and as a consequence will leave a lost generation. The reason why this is bad is that we already know people are not saving enough, partly because they can’t afford to but I suspect because they have no idea why they need to save. When they "retire" where will they turn?

So the question is, are you prepared to join this revolution? This message will be tweeted and emailed to key influencers but you have a voice and influence so spread the word. Retweet, email your contacts and make a difference. The more followers the more noise we can make and let’s make 2013 a generational shift for all the right reasons.

Follow me on Twitter so please spread the word and lets change the world.

Friday, 18 November 2011

A tale of two people

I want to share a story of two people; Mr Smith and Mr Jones.

Mr Smith wanted a BMW 5 Series; because it would improve his status and he would find love and happiness with the woman of his dreams. He looked everywhere and there were thousands of second hand BMWs. Eventually he found a shiny silver one at an incredible price. He paid his money and drove his dream car away.

Very quickly the car started to fall to pieces, all the shininess hid underlying problems and quickly the car was worthless. Mr Smith lost all his money and had not found the girl of his dreams. And when he went to find the man who had sold him the car he had gone.

Mr Jones wanted a car to get him from A to B, he wanted something that would be reliable and he wanted someone to look after it for him so he could focus on the journey. As a bonus he wanted to meet the woman of his dreams.

He did his research, and found someone who listened to what his goals where, prioritised them and then delivered him with the car to achieve those goals. Even when the car felt sluggish the person who helped him to find the car stepped in and helped get over those sluggish moments. In the long run Mr Jones achieved his goals and was able to focus on the journey whilst someone else made sure everything else was working, and more importantly he met the girl of his dreams and got married. He paid a little more than Mr Smith but the extra money was worth every penny.

So what does this mean, many people (including trade bodies like the ABI) have a fixation that saving (whether as a pension or an investment) is about selling a product. Just look at the latest quarterly ABI consumer survey, it focuses on products (including this idea of simple products), it focuses on "value for money" and says nothing about financial planning.

The point is simple unless we can get people to understand the order to financial advice people will always be fixated on price and product, and not goals. A pension is great but what do you want to achieve, can it be achieved through another means.

There are excellent financial advisers who focus on financial planning so what do you think, what do you do? What do people around the world do?

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