Having spent most of my working life in Financial Services I have built up a good knowledge across the industry. Quite a number of years were spent working in an investments area so I have always considered myself to be above the average person in terms of knowing ‘stuff’ about investing in funds. I can recall occasions where I’ve discussed investments with friends/colleagues who were new to investing and have shared some tips with them and suggesting they should see a Financial adviser. Having the basic understanding of the growth potential for investing money in ‘good’ funds over the medium to long term was worth it…… Yet, I never followed my own advice. It wasn’t until recently that I decided to see an adviser to help me and my family with our financial affairs. I don’t think I am alone in this.
The main reason for not seeing a financial adviser sooner was because I thought I knew enough to make some decisions for myself. I couldn’t really spare the time and to be honest the dread of sitting with someone I didn’t know for hours discussing personal and financial matters felt uncomfortable. Also, this wouldn’t be the most riveting of evenings that’s for sure! Then there’s the cost consideration, did I really want to pay for advice? Could I afford to? Did I need to?
Investors have so much more choice now, being able to invest directly with providers, bypassing the traditional advice route with simplified advice, robo-advice or direct to client propositions. Investors have much more control of their own investments with online portals providing more and more functionality, it’s so easy to bypass the adviser route.
There have been some high-profile cases of mis-selling and how can any of us tell an adviser is trust-worthy? According to the National Audit Office, firms have paid £22.2 billion in compensation for Payment Protection Insurance (PPI) between April 2011 and November 2015 to customers who had bought PPI. In addition, there have been public reports in recent history where general advice guidance and monitoring of a customer’s needs had been lacking in the adviser community, relating to mortgage advice. Customers did not realise until it was too late at the end of the mortgage term that they did not have enough growth to cover the loan amount owed, as one example.
Simplify Consulting carried out research earlier this year into whether people use financial advisers for their investment choices and why. We asked the same questions to our audience as I had only recently asked myself.
Only 38% of people that were asked confirmed they use a financial adviser, which begs the question – what about the remaining 62% – what is stopping them? There could be several reasons impacting their decision and cost was the biggest factor for most of our respondents, although surprisingly most of them fell in the 36-45 years age bracket (42.31%) and 46-55 years age bracket (23.08%) who statistically are at the height of their earning power.
When it comes to making their own decisions, 15% felt they had enough knowledge and experience of their own to make their own investment decisions. There is a huge portion of our survey respondents that don’t feel they have enough knowledge and did NOT use a financial adviser. What do they do and where do they go? There are government initiatives out there to support the general public in money matters, including the Money & Pensions Service set up by the government this year to bring together three financial advice bodies: the Money Advice Service, The Pensions Advisory Service and Pension Wise into one single organisation.
Then there is the time factor. We all lead busy lives and 8% didn’t have the time to find an adviser or to spend hours discussing their financial affairs. Does this lack of time equate to inaction? But it also takes time to find a financial adviser and just how easy is it to find a trusted adviser? I preferred to go down a personal recommendation route and using an adviser within the family. This may not be an option for many people so leaves them to either visit known institutions such as their bank or searching cold for Independent Financial Advisers through the internet or respond to adverts.
What was interesting to note was 8% percent didn’t think that at their current stage of life they warranted advice. A further 12% felt that the amount that they were investing was not enough for financial advice to be considered. Some believe that any amount of money, large or small invested in the ‘right’ investments, can have the potential for better returns than an equivalent amount held in cash. My experience tells me that it doesn’t matter how old you are or how much you have to invest, that starting early, and even with small amounts can yield the financial rewards.
Captured above are just some of our initial findings. We will explore this topic more in some further publications. In the meantime, let us know what you think. What’s your view on advice and why people may choose not to follow that traditional route?
Written by Jayne Brown Wealth Consultant