The ‘educated guess’, Kryptonite and the democratisation of financial planning

The “educated guess”…

It’s something we all do every day (probably every hour of every day) and we do it so often it’s part of our underlying subconscious decision making process.

It’s something we all use in the short term (“Shall I leave early to avoid the traffic or not?”), and in the longer term decisions (“What changes do I need to make in my business to ensure it’s minimising risk and maximising opportunity?”).

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It’s sometimes works out (“I reckon West Ham will stay in the Premiership but won’t win the league”) and as and if not more often sometimes it won’t (“I reckon this is the year England will lift the world cup again!”).

In fact, two of my favourite books, “Thinking fast and slow” and “The Chimp Paradox” talks in depth about how we make decisions and, however sure we are, the majority of the decisions we make are of the ‘best guess’ variety.

In our profession we’re encouraged to make ‘best guesses’…many I actively try to avoid!

Trying to Accurately “Guess” what the next budget change will be, what particular market’s are going to do, or what fund manager will outperform another is to me, a fools errand best avoided (although some of us in the world of financial planning or advice do feel we can add value by providing an insight into there areas).

However there’s questions I don’t mind having a stab at. This one fascinates me at the moment…

“What will mass market financial advice/planning look like in 5 – 7 years time?”

As some of you may know I’ve got an interest in the auto enrolment compliance market (before you stop reading, and being acutely aware of the ‘kyptonite’ nature of talking about AE on adviser lounge, this article isn’t about Auto Enrolment).

In the corporate market we’re currently seeing a fundemental shift.

A move where larger employers (who usually by their nature have more complex needs as a business) are happy to engage with a fee based consultancy solution to smaller employers who are looking for a solution which is a commodity based solution.

A solution which still involves guidance and support but allows smaller employers to have all the tools to make simplified decisions so that they are able to comply with the regulation.

A move (and a solution) I’ve recently written about in a recent White Paper (which you can download here)

That’s not to say there is still room in the corporate space for a fee based consultation option for smaller firms. However smaller budgets and more simplified solutions mean that sometimes these more bespoke face to face offerings aren’t required and a easier, low cost and more systematised route will do the job for the majority of small SME’s and micro businesses.

This principle also, rather neatly, applies to the personal advice market…

The individuals with larger pots of money and (often but not always) more complicated financial arrangements are happy to pay for face to face ‘tailor made’ advice.

For most of us who frequent this site it’s where most of our fees come from…

However this leaves a massive gap.

The gap with Millions of us in.

The ones who need help, support and guidance to build pots to achieve financial goals.

The millions of us who need a framework to achieve our financial goals, the gentle reminders on why doing this is so important and a low touch hands on support if required.

The millions of us in the UK who would love our own version of Learnvest or a Financial Weight Watchers.

I know there are some in the advisory community who still think the ‘mass market’ individual advice can be serviced with a consultancy solution.

That might be true.

However the reality is that in a market where you’re swapping money for time (the reality of most consultancy models) you want to ensure that you’re paid as much for your time as possible. Something which is tough when dealing with less wealthy clients.

There’s also an element of the advisory community who think technology as a threat to high end consultancy. This is also a fallacy.

There will always be a demand for face to face bespoke financial planning. However in most of our businesses we’re understanding the commercial realities of ensuring we have clients who can truly afford it.

So, what do we do to help the millions of us who need help with their money but aren’t at the stage where they can afford a consultancy solution?

For me, the answer is simple…

Democratise financial planning by turning into a commodity.

Have a technology driven, simplified solution which gives people the framework to develop great financial habits?

Keep the cost at a level which allows the platform to make a profit, ensure the millions of us who might use it value the service, and help provide the next few generations a better chance of financial security.

That’s what I’d love to see develop in the market as a solution to help the millions of us who need financial guidance and support.

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I reckon that something like that will come to fruition, in one form or another, in the UK very very soon.

However that’s just an ‘educated guess’…

What do you think?