It’s Time We Did What It Says On The Tin

A Twitter discussion has highlighted a significant issue we financial advisers have in engaging with the public.

Or do I mean we financial planners?

It seems the financial advice world is polarising into two broad camps. It’s time we made it easy for the public to tell one from the other, and therefore which is right for them.

How To Tell Black From White

Henry Tapper, an ex-IFA and a big name in the pensions world, wanted some advice. So he approached three wealth managers. Here he describes his experience.

Now, the first thing I thought (and tweeted) was along the lines of “You need financial planning, why did you speak to a Wealth Manager?” Trouble is, the public don’t understand what a Wealth Manager actually does. In fact, I’m not sure I do either! (I’ve written on this before).

The discourse continued with this question from Sam Pickford (@pickfos): “How does the average bloke tell a financial planner from a wealth manager? unbiased/vouchedfor don’t distinguish”.

It’s a great question. So why don’t we, as an industry, make it clear to the public what different names mean.

What Do The Terms Mean?

Why don’t we set some rules in place about what different descriptions mean? The FCA can enforce it to make sure the service someone receives matches their marketing.

To get the ball rolling, I’d suggest the following:

Financial Planning: The provision of a financial plan, probably involving cashflow forecasting (whether it’s some figures in a report, a spreadsheet, or specialised software). This to be followed by the provision of financial products, tax planning and investment management to realise that plan.

Financial Advice: The provision of financial products to suit client needs. May be online.

Wealth Management: The provision of investment management.

Financial Coaching: The provision of financial guidance to help people understand their relationship to money. Not regulated.

Oh, and I’d outlaw the term ‘Robo Advice’ completely!

A firm would then have to name themselves according to the predominant service they offer.

Restricted And Independent

The definitions Restricted and Independent have no relevance to this debate as it has no bearing on the type of financial advice given. A Financial Adviser could be independent, a financial planner could be restricted, and a financial coach doesn’t care about products at all.

I’d also argue the public aren’t that interested in whether a firm is restricted or independent. There is one very large national practice who are restricted yet seem to be doing pretty well!

Meat On The Bones

Let us agree these definitions amongst ourselves and present them to the FCA. We need to be clear to the public what they are signing up for.

To give a few examples:

  1. A DFM who has a small team of financial planners would be called Wealth Managers, as planning is not part of the core proposition (I came across one DFM that said it provided ‘holistic financial planning’ because they had two financial advisers in the London office.)

  2. For a firm to call itself a financial planner it MUST have a process by which it seeks to meet with clients at least once a year. Perhaps their T&C scheme must include a minimum number of hours for interpersonal skills training

  3. A firm who has an historic client bank that they do not service other than a regular newsletter would not be allowed to call themselves financial planners

I’m pretty sure we could come up with a document which describes, in general terms, the service a client could expect to be offered by each firm type.

Getting It Across To The Public

Such definitions are all well and good, but how would we get this out to the public?

Unbiased and VouchedFor would have a part to play. The definitions could be outlined on the home page, then be highlighted on each firm or individual’s listing. Likewise other people who make comment on advisers such as Which?, Paul Lewis and Jeff Prestridge.

The important thing would be that marketing would not be allowed to circumvent the definitions. The whole point would be to provide clarity for the public – a financial adviser firm shouldn’t call itself ‘XYZ Wealth Management’ unless it really does provide DFM type services as its main focus.

Conclusion

We can debate these definitions (I know some will argue that you can do planning without cashflow, for example), but that would be to miss the point at this stage.

How do we answer Sam’s question? Our marketing has confused the public and they no longer know where to go for the right type of service for them.

If an industry professional such as Henry is getting confused with the current position, what chance do the public have? How many people are being put off taking advice at all as a result?