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A good business, as long as you’ve got teeth

This blog started out as a nice, simple, feel-good piece – an antidote to all that post-RDR angst. But it’s been rattling around in my head for weeks and has changed shape in the process.

It all started following a trip to the dentist, of all places.  It’s not a conscious decision but I do my bit to keep my dentist in business. It’s not just me, of course: he’s got all the clients he can handle. As I sat waiting my turn, I thought what a good business it was: as long as people have got teeth, he’s got a business. And then some nice parallels struck me: as long as the tax system is complex, advisers have a business; as long as people struggle to do-it-themselves with their personal finances and overcome inertia or paralysis-by-analysis, advisers have a business. Sure dentists have to study hard and keep their skills up-to-date but that only provided another neat parallel.

The idea only seemed to gather steam after I did an internal training / awareness session where I work. It was with a small sub-set of staff whose profile could be described as young with relatively short-service. It was on the value of financial advice. I wanted to know where their perceptions and awareness were to start with so the very first part was a few questions to which they gave anonymous answers to encourage frankness.

My group were simply neither old enough nor affluent enough to have seen a financial planner. What’s more, they readily cited examples of the “dark side” of “advice” – some of which dated back to a time they surely couldn’t remember. So while my sample came from a financial services business, encouraging results were not necessarily a foregone conclusion. Yet, before the main session even started, it was clear from their responses that they saw financial planning as requiring a high level of skill and could see its value, unprompted. Not only that, but this was based on their estimations of the extent of exams, hours of study and CPD, which turned out to be significant under-estimates. Fortunately, I still didn’t find time to write up my feel-good piece.

What happened next was that I came across two astounding, diametrically-opposed findings from the same piece of research. In short, three quarters of respondents believed they were not saving enough for their retirement yet, among the same group, 90% had never even considered increasing the level of their pension contributions. Worse, this finding reminded me of another relatively recent piece of research. That study found similar anachronisms: apparent realism in some regards (over half of respondents expected a household retirement income equivalent to the minimum wage or less) and apparent delusion in others (lofty ambitions for what retirement means and anchoring of retirement age expectations around state pension age).

I came to a realisation: there’s a gaping hole in my dentist analogy. Clients may or may not keep up their regular 6-monthly checks but, when dental pain sets in, you can be sure it will drive them to do something about it! And while it may not be ideal, it’s unlikely to be disastrous and irrecoverable.

Financial planning is not the same. There’s an obvious problem with, say, people only feeling the urge to do something about life assurance after the death of a loved one or to make provision for retirement once they’ve retired and feel poor. Let’s not forget, either, that it’s not just a problem for the client. Rather than worrying about conveying the value of advice, dare I say a bigger challenge is finding the messages that have the teeth to get potential clients to act.

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