In recent weeks I have been increasingly frustrated by inaccurate
reporting and sensational headlines that would lead you to believe that
financial advisers are a dying breed and a new wave of DIY investors will
appear.
Of course, we have seen this before in other sectors when B&Q came into the market,
we all thought we could buy some tools and put in a kitchen or a bathroom. For
some this came easily for others it was a costly disaster. Of course the reason
why we do it ourselves is because it is cheaper but also we should feel
confident that we can do it ourselves.
For me I am happy to do things in the garden where little damage can
occur but when it comes to doing anything in the home no amount of manuals will
persuade me to do it myself. I pay an expert to do it.
Perhaps we go down the DIY route because we think builders,
electricians etc are there to rip us off. We are never sure of what their
charges are so actually it makes sense to buy the goods ourselves.
So how does this apply to financial services? Well the message that is
going out in the press is very one sided, it implies that clients will be
abandoned or face a huge hike in fees and therefore the only option is to turn
to DIY. In fact a recent survey from Allianz Global Investors indicated that
60% of advisers stated it would not be profitable to service clients with less
than £50,000 in liquid assets.
Of course this was a sample of 160 advisers so not a large proportion
of the 20,000 plus advisers in the UK.
If we hold that thought we read that clients who thought they were
getting “free” advice will suddenly be hit by fees. In reality many clients
won’t be paying any more than they are currently paying but the difference is
that if that fee was not disclosed it will be going forward. But many advisers
have already moved to a clean fee based model.
So actually the cleaning up of advisers has happened and many clients
already know what fees they pay and what service they receive. The problem the
journalists are missing is the DIY market which is shrouded in hidden charges.
I recently got a letter from a provider stating I would get up to 0.5% cash
back on funds. When I looked at how much this would be they were quoting
projections on 0.25% and not 0.5%. I then considered that in reality I am
already getting some cash back from this provider – so is this any different to
what I am currently getting?
My point is this, actually I don’t have a clue how much they are
charging for their service and how much I get back from them and it is too
complicated to find out. I did do some work on direct providers and most
operate in this way.
So actually the argument is that come the 1 January both direct and
adviser should be totally clean in the way they charge. Equally both the direct
and adviser market should be working together with journalists to get a
positive message out there because going back to my example there are people
who think they can do it themselves and then have to call in the expert, there
are those like me who call in the expert before they try to do it themselves
and there are those who can do it themselves. The key message in all of this is
financial planning, if journalists would help promote financial education then
both parties could work together and help people plan for whatever goals they
have.
One good thing that has come out of the last week is that I have seen
a website which is promoting financial education to DIY investors; we need more
of these sites so people can decide which route they go down. And what about
those with assets below £50,000, if it is cost effective to offer these clients
advice then advisers will do this but we will have to wait and see how the
market plays out.
To the journalists there are plenty of good financial planners who
would love to work with you to provide balanced articles, are you prepared to
be part of a financial revolution and be a contrarian journalist…..
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