People are still making expensive mistakes with their long-term savings, but how can we get a better message out about financial advice?
- In the context of what is at stake, advisory fees seem relatively small, but how best to sell this message?
- Younger generations are not as receptive to financial advice
- The strongest message is that financial advice makes you richer
It is clear that there are a lot of people who need advice that are not getting it. From pension scams to DB transfers, inexperienced people make expensive mistakes when they try to manage complex financial decisions by themselves. In the context of what they lose, advisory fees seem relatively small, but how best to sell this message?
It isn’t getting through at the moment. A recent report by Dunstan Thomas found a marked lack of appetite for financial advice among baby-boomers, with almost half (47%) doing nothing to find out more about their post-retirement needs. And if it’s bad among babyboomers, you can forget generation X or millennials. They’re too busy saving the world, or doing selfies on Instagram.
That is not to say that this group is disengaged - a quarter rely on reading the financial pages of national newspapers for guidance. It would seem that they don’t want to pay for it. The same research found more than half (54%) of those surveyed had no intention of visiting an adviser for inheritance tax-related financial advice - just 12% planned to use an adviser for this purpose.
Most people will not be sold on the message that they don’t know enough to do it themselves, so they should seek out advice. That is patronising and a turn-off. Equally, the message – so beloved by pension providers - that people are woefully under-provisioned for retirement and unless they save 50% of their income for the next 20 years, they will spend their retirement scavenging for nuts, isn’t particularly appealing either. People don’t tend to save more, they simply switch off.
To my mind, the easiest sell for financial advice is that it makes you richer, far richer than the cost of the advice. Clients of financial advisers can hope to be around two-fifths better off than those doing it by themselves. That’s a pre-tax income of £33,557.45 versus £20,373.40 in retirement. The question is how much to pay for that extra £13,000 to £14,000? On balance, the £1,000 or so paid for a financial adviser each year would seem like a reasonable trade.
Of course, financial advisers aren’t paying over that money, it comes from two places – better investment growth and persuading people to invest more. As Dunstan Thomas director of retirement strategy Adrian Boulding said: "It is worth noting financial advisers instil the financial disciplines of saving, planning and reviewing progress, which helps build long-term savings." Now that is a message worth selling.