Risk is increasingly being transferred from employers and government to individuals – as highlighted by the introduction of pension reforms this year freeing people from buying annuities and the demise of final salary schemes.
These two key issues mean more and more of the population will need to take an increased interest in their financial well-being. More people, with more money, have to make decisions about where they invest; something which can only be good for the wealth management sector.
But how that service is delivered to clients is of course the big question.
For every 10 people that might like to shop online, there will be a proportion that stop at the research stage and prefer other means of acquiring their financial services. That often means face to face, or at least some interaction with a human being.
Whilst simply buying a financial product online may be easy enough, buying financial planning is less easy. The adviser delivers his/her best when they really understand the client’s life goals and aspirations. By tapping into these big issues they can deliver great value to the client and any investment is made within a proper context.
It is worth reflecting on the point that although we have had some volatility, investment markets have been mostly up since the 2008 financial crisis. Even an average performing portfolio would have delivered some pleasing numbers to its owner, which can sometimes offer up a false picture of skill for DIY investors.
One remembers very clearly the number of non-finance professionals who were ready with tech company recommendations at the end of the 1990s – you couldn’t go wrong, or so it seemed – and we all know what happened next.
We might not know when, but we do know there will be significant falls in most asset classes at some point. It is at these moments that clients discover whether their investment strategy is actually aligned to what they really need. Following the markets through simple trackers may be cheap, but they will do exactly what it says on the tin and at times of market stress that might not be a pretty sight.
No one wants over-exuberance followed by a crash, but when it does happen, it is often the time when really good service providers come to the fore, with existing clients even more pleased they had the foresight to get advice. This means new clients are often attracted away from more simplistic transactional services.
Doing it yourself just because it’s easy doesn’t make it necessarily good for you. I could have built the extension on my house by myself, but I can sleep well at night because I employed the services of an architect and a structural engineer.
When financial decisions are big ones, it’s worth paying for the right advice. That doesn’t mean it is guaranteed that the roof won’t fall in, but it’s much less likely and if it does I have recourse to their professional insurance.
