The UK financial services industry has a deep culture of product-based solutions that supposedly act as convenient tools to help people manage their personal finances and, most notably, their pension savings.
Indeed, the director of policy and advocacy at the Pension and Lifetime Savings Association, recently told the Work and Pensions Committee that a combined product for anyone reaching retirement age could replace needing to provide advice.
The combined product would be a mixture of cash, investments, and guaranteed income, capable of creating a retirement strategy, therefore foregoing the need to seek advice on how to approach your pension.
Attempts to try and simplify retirement planning are commendable. Retirement is a significant period of change for people as they find themselves with a lot more free time and have to seek the best financial choices with their pension saving in order to maximise their financial wellbeing.
However, a combined product is unquestionably not the way to achieve this.
A fundamental part of devising a retirement strategy is factoring in a person’s individual circumstances, which combined products fail to do. This is because they utilise a self-navigation system of robo-advice that attempts to figure out what an individual wants to achieve with minimal human intervention, usually establishing a retirement plan based on short-term goals. This is a problem as what most people need is a long-term retirement strategy.
Further, combined products lack transparency. This can cloud public understanding of what the product can achieve, and the impacts of factors such as longevity being unknown to the majority of the population. This could add even further complexities to what is already a complicated process.
We have encountered these ideas before, and the general consensus is that there is no substitute for independent advice. However, uptake is still limited among Britons.
Accordingly, the financial services industry must accept that changes are required to accomplish a more accessible industry where advice is readily available to all, not just the wealthy few.
Since the onset of the pandemic two years ago there has been significant progression, suggesting that independent financial advisers are willing and able to accept the need for such change.
A transition to virtual services
The financial services industry, like most sectors, was forced to adapt quickly when the pandemic first hit two years ago. Lockdowns and social distancing rules saw all adviser-client interactions carried out virtually for this period.
Research from Abdrn from the end of 2021 found that nearly a third (31 per cent) of people that had received financial advice had used remote advice channels for the first time since the UK first entered lockdown in 2020.
Pre-pandemic, in-person meetings between adviser and clients were the norm, with this sort of interaction perceived as integral to building relationships and making important decisions throughout the development of a retirement strategy.
However, advisers have since changed their approach to interactions, with consultations with clients being carried out over telephone and video calls replacing the need for in-person meetings.
