I want to help people make the right decisions at retirement but it seems many people don’t want to help themselves by properly engaging with advisers.
In the old days (whenever that was), people were more open to taking advice and more trusting of experts but nowadays many people have a closed mind to advice and don’t necessarily trust advisers. This has not happened overnight but has crept us on us over the years, but the lack of engagement has been accelerated by events such as RDR which created the so-called advice gap and by changing attitudes and customer behaviour.
However, there are still areas in which financial advice is highly valued and there is increased demand for advice in certain areas including pensions and retirement income.
I am prompted to make these comments because I feel bruised by several difficult encounters with people who have recently approached me for advice but for different reasons haven’t understood how the advice process works and this has led to miss-understanding and disappointment, as much on the client’s side as mine.
I think there are three areas of misunderstanding which may account for the lack of engagement.
The first is the perception is that it is easy. One of the paradoxes of pension freedoms is that it has given people almost complete flexibility and a feeling that they can make their own decisions, but behind the freedoms is a layer of complexity which few people can understand without expert advice. This means that decisions which may appear simple on the surface can only be made with some complex decision making.
The second is the value of experts. There is now a general mistrust of advisers and some experts are not all they are cracked up to be.
It goes without saying that advisers are highly qualified and experienced and can truly call themselves experts and more importantly can ensure their clients get the best possible outcomes.
Finally, there is the question of cost. I am tackling this issue in my next guide where I explain that the fee for advice is the actual cost incurred by the adviser firms plus the value added. The cost of running an adviser business can be easily calculated and it doesn’t help clients that a significant element of the costs are regulatory fees. But how do you calculate value added?
Value added can be expressed in terms of better outcomes. Put simply, a pension pot which has an advised investment strategy will probably meet the objectives better than a ‘self-select’ investment strategy. Value added can also be expressed as avoiding make poor decisions that result in poor outcomes.
A modest fee for advice may pay dividends in terms of added value. If only more people would understand this.