Unless you’ve been hiding in a nuclear bunker for the past few months – not a bad idea, some might think – you’ll be aware of the Financial Conduct Authority’s “targeted support” initiative. For those still in the dark, let’s quickly recap what it’s all about.
As is often the way with FCA matters, this is actually easier said than done. But we can fall back on the official spiel and hope it makes at least a modicum of sense.
In essence, targeted support would see adviser firms “provide a bespoke suggestion to specific groups of consumers who share the same characteristics”. This would assist individuals in accessing the “guidance and advice they need, at a cost they can afford, when they need it, so they can make informed decisions”[1].
You might think that’s not the greatest articulation in history. I would be tempted to agree. But there’s one thing that’s easy enough to grasp: the FCA believes this service should be delivered for free.
The initial findings of the Advice Guidance Boundary Review, a key document in shaping the way ahead, were published towards the end of last year. They were generally met with enthusiasm, with words such as “ambitious” and revolutionary” bandied about[2].
I’m not sure I share in this fervour. I lean more towards the school of thought that fears targeted support could encourage conflicts of interest, blur dividing lines that are already dangerously fuzzy and generally bring even more confusion rather than greater clarity.
But let’s set all that aside for now and focus instead on some “bigger picture” considerations to which this continuing saga is giving rise. There are four in particular that I think merit advisers’ attention.
Everyone can benefit from financial advice
The concept of financial advice for all is crucial to the future of our industry. By extension, it’s also crucial to the millions of people who could benefit from our expertise and experience.
I’ve argued for years that the longstanding tendency to provide advice only to those who are already wealthy – or who are well on their way to that fortunate position – is counterproductive. The mere notion of targeted support suggests the FCA might just concur.
But there’s a big hurdle to overcome here. The FCA may recognise advice’s role in making a positive difference to people’s lives, but the unhappy truth is that many consumers still don’t.
The value of financial advice remains widely misunderstood
In discussing targeted support, the FCA has referred to consumers’ “fundamental misunderstandings”[3]. This is a very delicate way of saying a good number of people haven’t got a clue as to how financial advice could help them.
Many respondents surveyed for the Advice Guidance Boundary Review didn’t know the cost of advice. Some said they wouldn’t be able to afford it in any event. Others voiced concerns over independence, trust and the nature of commission or insisted they could make their own decisions around pensions and investments[4].
Such findings should be a source of both dismay and alarm for advisers. They underline how much work remains to be done in building our industry’s credibility in the eyes of the wider public.
Do initiatives like this actually work?
No-one could sincerely claim an initiative such as this doesn’t deserve to succeed. It’s a fundamentally noble exercise, after all. But whether it will truly work as intended is, of course, another matter altogether.
I’m inevitably reminded of stakeholder pensions, whose introduction in 2001 was intended to drive more long-term saving for retirement. Take-up was utterly paltry, and such schemes were dismissed as a flop within a year[5].
Along worryingly similar lines, the FCA says targeted support could lead to “more people investing, which will help provide capital necessary to stimulate economic growth”[6]. Not for the first time, the assumption that consumers fully appreciate how they might gain appears sadly mistaken.
Advisers have to shape their own destiny
At first glance, the above points seem to encapsulate problems beyond our control. As advisers, realistically, what we can do about the advice gap, limited financial literacy and “solutions” that turn out to be nothing of the sort?
Well, I think we can actually do quite a bit. Specifically, we can stop relying on others to set the agenda and finally realise we can play an enormous role in shaping our own destiny. Every one of us has to work harder to highlight the importance and appeal of what we do.
Ultimately, we need to ensure the adviser community is seen as approachable, affordable and even indispensable. In other words, we need to do a whole lot more for our industry and those it aims to serve. Yes, maybe targeted support will eventually prove revolutionary – but wouldn’t it be nice if we were to start a revolution of our own for a change?
Andrew Goodwin is co-founder and CEO of Truly Independent and the author of ‘The Happy Financial Adviser’.
