We could all do with a lifeline when attempting to navigate the world of personal finance. But it is becoming increasingly difficult, if not impossible, to find financial help that doesn’t have strings attached, whether it’s offered by a real person or a robot. Iona Bain asks – when ARE young adults going to get the proper advice they need?
Fancy getting some financial advice? Unless you have a meaty pension or investment portfolio, you can forget it pal.
These days, you’ve got to be able to make it rain, Fat Joe style, before you can get any help with your rainy day fund.
Most young folks will continue to be excluded from the world of tailored financial advice, despite growing pressure to make expert help available to all. A major review earlier this year has conceded that many of us will only be able to afford so-called “robo advice”, an automated online service increasingly offered by banks and investment providers (although you wonder who came up with the name “robo-advice” – I wouldn’t want a robot anywhere near my cash after watching what they got up to in “Humans” and “Westworld”).
The Financial Advice Market Review has also recommended more support for firms offering ‘guidance’, far more limited than financial advice but probably the general public’s last hope of getting help with their finances. The FAMR revealed that a typical financial adviser now charges £150 an hour, with advice on a pension costing £1,350. Those fees are easily soaked up by high-net worth individuals but disproportionate for those with less than £50,000 in pensions or investments.
Meanwhile, banks and building societies have rapidly shut down their advisory businesses following a wave of expensive mis-selling scandals. Experts say these changes are the unintended consequence of the Retail Distribution Review, which forced advisers to charge fees on new business rather than accept commission from financial companies in 2014.
Maike Currie, director of personal investing at Fidelity, says: “While the move to fee-based advice has improved transparency and ended conflicts of interest, it has also meant that advice is expensive and not always cost-effective, particularly if you’re seeking help in relation to smaller amounts of money or have simpler needs. Many consumers have unintentionally slipped into what has been dubbed an ‘advice-gap’ – unable to afford or access advice when it comes to important financial decisions.”
Here is the problem. Financial advice in the flesh is too expensive (and ends up with you picking products, which may turn out to a busted flush, leading to a massive unwanted wrangle with the Financial Ombudsman.) Financial advice online – aka robo advice – sorta fits the bill, but tends to focus on picking products too, especially investment funds, and may only be suitable for those with big ol’ sums to invest anyway.
So what if you just want some general recommendations, strategies for saving and debt management, a helpful steer on your finances? Financial guidance would be your friend. But firms are reluctant to offer this in case they accidentally trip over into advice and become liable (i.e. suable!) for whatever they tell you. So few firms are offering this, online or in the flesh, at the moment. The FAMR is recommending ways to remedy this, to make guidance a less risky area, but when will these changes occur?
The cynical part of me says “12th of never” but even my more generous side reckons it will be many more years. The FAMR was basically an invitation to more consultations to possibly consider whether something might just be a good idea in the future. Hardly helpful for the millions of young people who need help on their finances NOW.
There is a public service that can be trusted for its information – the Money Advice Service. But this is getting scrapped following the Budget in March. The MAS was widely criticised for paying hefty wages to top brass and had quietly ditched plans to introduce a specialist young person’s service, as reported exclusively here in 2011. It also spent more than £100 million on advertising to get its name out there and evidence suggested that the publicity blitz hadn’t really worked.
Little wonder. The financial advisers who paid for it undermined it every step of the way, as did MoneySavingExpert.com, which very obviously didn’t appreciate such a direct competitor. It became a popular punch bag of the mainstream press who love a critical story about public bodies. They were given ample ammunition by a committee of MPs were quick to pass moral judgement on highly-paid MAS executives, even though chief attack dog George Mudie had previously claimed £62,000 in expenses over four years and voted against greater transparency on MP’s expenses. People in glass houses and all that…
I don’t pretend that MAS was working brilliantly. Did you ever read it? Exactly!
But with some tweaks (and time), that huge spend on publicity might have translated into results. More people being helped with very general, but nonetheless important, advice (and yes, that’s how most normal people see it, regardless of it being technically ‘guidance’) and not necessarily being guided to pick certain products at the end (as MSE and other sites do to make a dime).
Sure, there is a hotchpotch of different charities, commercial websites and independent blogs offering guidance right now. Some focus primarily on products, others are much more single-issue or focused on certain demographics (like low income individuals in debt). This meant MAS inevitably replicated information. But not all its stuff was widely available elsewhere on the internet and most importantly, it provided a one-stop shop that (in theory) everyone would know and trust. It also was starting to do a socially useful job with its Financial Capability Strategy, which supports financial education in schools.
It had the potential to be a universally-used resource for those transitioning from education to the big bad world, which largely casts young people asunder to figure out finances on their own. If they do want to get clued up, they now have to read personal finance sections in newspapers (largely focused on older people) or the likes of Money Saving Expert, which often focuses on products (handy if you can provide click-throughs to companies in return for fees) or saving money at the expense of everything else. The financial ‘takeaway’ for young people shouldn’t be to maniacally save coupons, enter competitions and surveys every day of the week or attempt fiendishly complex tricks with their current account in order to be ‘good’ with money.
The plethora of extreme money-saving blogs and websites can be overwhelming and even demoralising if you just want to get a handle on simple budgeting.
Sometimes, I really wonder whether we all need to get back to basics. Sadly, this messy landscape of ‘advice’ and ‘guidance’, bereft of a single independent resource that all young people can trust, make the bare necessities of financial management all the more elusive.