Alan Moran: Here’s what I’ve learned after 30 years in advice

Advice milestone

I noticed the accompanying article in the financial press recently and was struck by the similarities with our own business.  Maybe the writer’s age and length of marriage differ slightly but…

Alan writes. Welcome to the 2020s! As we start the new decade, I reach a personal landmark because I can now reflect back over 30 years of helping clients as their financial adviser.

How different things were in January 1990 when I took on my first clients when I was an agent for General Portfolio; the stories I could tell…Their products gave dreadful value but, to their credit, they gave me the grounding in financial planning that has remained the core of what I do. The 1986 Financial Services Act had only been in operation for a little over 18 months and Financial Planning Services had tied up with General Portfolio.

It was the financial planning that I immediately took to heart and, at a time when fact finds for many were literally on the back of a fag packet, mine were held up as an example of how to complete a comprehensive fact find. On the other hand, my managers were often reprimanding me for not selling high commission products, but putting clients first has always worked and I am proud the clients from January 1990 are still my clients today.

Career shift

I am often asked why I started as a financial adviser and there are many reasons why we reach a turning point in our lives. I had been a teacher for 16 years and I saw the opportunity to ‘teach’ people how to manage their finances. From the start, I was attracted to the idea of making a difference in clients’ lives by applying my financial and consultancy skills.

I completed my CII Financial Planning Exams in 1991 and became an independent financial adviser in February 1992. I understood that the more knowledge that I gained the more that I could help clients, so I completed my advanced financial planning exams soon afterwards, gained my CFP certification in 1995 and was awarded my Fellowship of the Institute of Financial Planning.

I became fee-based in 1996, a foresight that meant that in January 2013 the only effect of the Retail Distribution Review was to increase my fees.

Regulation over the decades

Over the years I have seen a succession of regulators starting with LAUTRO, then FIMBRA, the PIA, the FSA, and the FCA. Each change of regulator was an attempt to improve value for clients, but have they got it right? Absolutely not!

Do not get me wrong, I would never want to go back to the ‘anything goes’ days of the 1990s, but successive mountains of administration have made it more difficult and more expensive to provide good, honest advice to ordinary people.

To be fair to the regulators it is much easier to objectify everything and turn things into a tick-box exercise than it is to measure values such as honesty, compassion, empathy, and contribution. Values are intangible and difficult to objectify but if the FCA could find a way to assess the values of the adviser a lot of the box-ticking could disappear.

For myself, there is absolutely no way in which I would ever do anything that was contrary to a client’s best interest and I have often done things for no charge as long as it was right for the client.

Have I always done everything perfectly? Of course not, and I will never apologise for being human. However, did I always set out to make my clients lives better? Absolutely. And have I succeeded? I am a perfectionist, so I will have to accept that 99% of the time is probably good enough.

On reflection, I find it amusing that the regulators have had their work cut out keeping up with me: I was qualified before advisers needed to be, I was fee-based years before the FCA demanded it, discussing vulnerable clients, disability, or diversification.

Golden wedding

My wife probably, justifiably, won’t forgive me if I forget to mention another landmark this month: we were married on the first of January 1970, so we have just celebrated fifty years of marriage. I have been blessed with a wonderful wife, three amazing children, and a grandson who makes me feel great every time I see him.

Top the golden wedding with a golden career where I have helped clients and made a difference almost every day and I could not ask for anything better.

To the younger advisers out there: if you wear your heart on your sleeve and put your clients’ interests first you will have a wonderfully satisfying career where you will make a difference to people’s lives. Then, when you are 71 like me, you can look back with great pride and say that you made a difference (as long as you tick enough boxes to satisfy the FCA or whatever regulator replaces them of course…)

I wish you all the best for the next decade.

Alan Moran is an IFA of some 30 years standing.

Tom Dunbar: Putting a number on the value of advice

Royal London, in conjunction with the International Longevity Centre recently put a number on how much financial advice is worth to those who receive it. Here, Tom Dunbar elaborates on the findings of that research…

There are many myths and misconceptions around financial advice: some say it is only for high net worth people while others believe the fees are too high. In recent years we have worked with the International Longevity Centre – UK to expose these myths and quantify the value of financial advice.

In What it’s worth – Revisiting the Value of Financial Advice data was analysed from the ONS’sWealth and Assets survey, which has tracked the wealth of thousands of people over two yearly “waves” since 2004-06 – we are currently on Wave 5.Through this we’ve been able to look at the financial outcomes of those who received advice and those who did not. Outcomes considered included the amount of accumulated pension wealth as well as net financial wealth – this includes current accounts, ISAs, life insurance products, shares etc. The probability of owning equity assets was also considered.

The results were startling with those who took financial advice being on average £47,706 better off than those who didn’t. This is split between a £30,991 boost in pension wealth and an increase of £16,715 in other financial assets.

Affluent vs just getting by

One of the most important findings of the research was the proportionate impact financial advice can have on people with more modest means. The sample was split into two groups – the ‘affluent’ and the ‘just getting by’ – with the ‘just getting by’ group benefiting from a 35% uplift in their financial wealth (shares, ISAs etc.) compared to 24% for the ‘affluent’ group.

When it comes to pension wealth the ‘just getting by’ group benefited from a 24% uplift in comparison to 11% for the ‘affluent’ group.

A key reason why we see these improved outcomes is that those people taking advice are more likely to invest in assets with the potential to deliver to deliver more return – albeit with more risk. Across the entire sample the impact of taking advice is to add around eight percentage points to the probability of investing in equities.

Ongoing advice

The research also highlights the impact of taking advice on an ongoing basis. According to the analysis those who reported taking advice at both Wave 1 and Wave 5 demonstrated almost 50% higher pension wealth than those who only reported receiving advice in one of the waves.

Far from being something only to be enjoyed by high net worth people, this research powerfully demonstrates the enormous impact taking financial advice can have on people from across the income spectrum.

While this research is able to quantify the value of financial advice with regards to the amount accumulated in pensions and other vehicles it is also worth highlighting the other benefits that are perhaps harder to quantify but still have an enormous impact on someone’s long term financial wellbeing. Tax and cashflow planning, for instance, are areas where advisers can deliver real value to their clients on an ongoing basis.

Tom Dunbar is distribution director at Royal London Intermediary

Powers of Attorney and Dementia – Don’t leave it to late

A diagnosis of dementia is extremely difficult to come to terms with, both for the person who is diagnosed and for their families.

Sadly, as the population in the UK is ageing and the dementia risk is understood to increase with age, these diagnoses are likely to become more common.

In Scotland alone, over 90,000 people are living with dementia, which is a term used to a variety of illnesses and conditions causing an impairment and a decline in intellectual functioning.

Those suffering from dementia often leave it too late to sign over a Power of Attorney to family members. It is essential to deal with legal matters while still in reasonable health and of sound mind.

If anyone would like to have a chat about any concerns they may have about giving the Power of Attorney to someone else, please feel free to give us a call. We will be happy to listen and help where possible.

Vulnerability – A challenge for us all.

Do you think you are Vulnerable Client? Probably not if you’re a young fit and healthy individual who makes astute business decisions every day of the week or someone who is responsible for others.

But wait a minute. Identifying where a client may exhibit vulnerability is a challenge, and one that the regulator has become more and more concerned about in the last few years.

There is a stereotype that clients are vulnerable through a reason of age, illness or infirmity, or due to a recent traumatic event. What about someone who is young, inexperienced, and may have no knowledge of financial matters.

And what about other not so obvious circumstances. For example, what about those seeking advice to transfer from a defined benefit pension. Would they be considered as being vulnerable?

In 2015, the FCA published an excellent insight into consumer vulnerability which focused on reasons for an individual’s vulnerability and identified good practice in dealing with these clients.

What about someone who is selling their business. These individuals – or families – are typically financially astute, used to taking risks, invariably they have made significant and impactful decisions. Should these individuals should be treated as vulnerable.

Selling a business, for most people, is something they will have little experience in, be of significant impact, and often be tied up with emotion. They need time to think, low pressure, and understanding that inaction can be less damaging than an action that is later regretted

Take Attitude to Investment Risk. The way people respond to information can differ from person to person and most advisers will, when explaining investment risk to their client, use numbers, graphics, verbal explanations as well as written descriptions. Is the same true for other areas of financial advice?

Some will respond best to meetings, but there are those who may not be able to provide their full attention for the period we, as advisers, often command. Some may favour an office meeting where they are free from distractions, others the comfort of their own home. Not everyone may share our command of technology.

Vulnerability changes with time – over the longer term individuals can become more or less able to deal with their financial affairs.

Some advisers have advocated an approach where all clients are treated as vulnerable. After all, giving clients more time to think and having trusted individuals in meetings are things that must be in those individuals’ best interests. But on the other hand, others may find this approach patronising.

And maybe what we are saying here is that, surprise, surprise, everyone is different and that we as advisers have to be acutely aware of this.

Of course, we also have to be aware that we as advisers can be vulnerable as well!

FCA publishes guidance on treatment of vulnerable customers

The Financial Conduct Authority (FCA) has published a 41-page piece of guidance for businesses on how to treat vulnerable customers better.

The guidance is split into a number of sections: understanding the needs of vulnerable customers, skills and capability of staff, product and service design, customer services, communications, and monitoring and evaluation.

Fundamentally, the FCA said it wanted to see firms doing the right thing for vulnerable consumers and have that embedded in their business culture.

The main aim, the regulator said, was for firms to be more focused on ensuring outcomes for vulnerable customers were at least as good as those of other clients. It also wanted to see greater consistency across both firms and sectors so vulnerable customers were treated fairly no matter what financial service or product they were buying.

Who are vulnerable customers?

For the purposes of its guidance, the regulator said a vulnerable customer is someone who “due to their personal circumstances is especially susceptible to detriment” and that its definition was intentionally broad.

It added: “Some consumers will be actually vulnerable because of their personal circumstances. Actual vulnerability can be permanent but is often transient because consumers’ circumstances constantly change. This can cause consumers, who had not previously been vulnerable, to become so at some stage of their life.”

The FCA said examples of vulnerability could include health conditions or illnesses that affect the ability to carry out day-to-day tasks, the low ability to withstand financial or emotional shocks, major life events such as bereavement or relationship breakdown, and low knowledge of financial matters.

FCA executive director of strategy and competition Christopher Woolard said: “Protecting vulnerable consumers is a key priority for the FCA and we want to see firms explicitly embedding the fair treatment of vulnerable consumers into their culture. Where we find that firms are not doing enough to ensure that consumers are treated fairly, we will take action.

“Firms need to take particular care to ensure that vulnerable consumers are treated fairly as they may be more likely to experience harm. The guidance should drive improvements across the industry, improving outcomes for millions of vulnerable consumers”.

Well done the FCA, say I.

Give youth a chance

Having been in this business for 30+ years, it is fair to say that I am not in the first flush of youth.   And that length of time in business has set me thinking about two very important points.  First, is financial services a career for young people? And second, if so, are young people taking it up?

My view is of course that it is an excellent career choice for a young person but are they taking it up?  I attend numerous seminars arranged by professional bodies and by insurance companies advocating their products.  What I see when I go to these events is a distinct lack of young people in the room.

“Where are they all?”

Traditional arguments against young people typically centre around the argument that clients of an older generation, who are usually the ones with the money, want advice from people of their own age group.   Would a person in their 50s or 60s, it is said, be prepared to really take advice from a veritable youngster?  Would they not prefer to receive advice from a man or woman who has seen a bit of life, found out about the problems that can suddenly overtake them and understand all the complex events that can happen?

Of course, there are practicalities to be considered.  If the client is in, say, his mid-fifties, does he I really want an adviser who is the same age or older than him? What if that adviser retires at the same age, or dies? Will that older adviser be able to advise the clients in their declining years, or will that client have to find a adviser in later life and start the planning process all over again?

This is, of course, particularly relevant to clients with large pension pots which require attention for maybe 30 years or more.

You also have to ask whether an adviser has to have the same sort of experiences as the client to be able to advise them. For example, unmarried advisers regularly give advice to married clients and similarly advisers who might never have claimed on a Critical Illness Policy, advise clients who have.

Its all about listening to the client, being aware of their aims and objectives and understanding their fears and ambitions.  You don’t have to be the same age as the client to empathise and advise. 

Many youngsters want to learn, pass on that knowledge and will give good responsible advice. 

No matter someone’s age, he or she may be able to teach us and our clients a thing or two. So why not give youth a chance?