Will the mass market embrace financial advice?

16th November 2011

It's another of those "weeks" next week  – like National Chips Week, Compost Awareness Week or National Windsurfing Week.  From 21 November to November 27, the UK will be celebrating Financial Planning Week – brought to you courtesy of the Institute of Financial Planning. There was a week of the same name last month in Canada.

It comes as IFA Promotion group Unbiased reveals that 47% of adults questioned said they felt more anxious about their finances than six months ago with savings and pensions topping concerns. 

But don't expect financial planning fireworks or dancing in the streets. It's a serious affair, backed by top end independent financial advisers, which seeks "to raise awareness of how important Financial Planning is to your life. It's not just for wealthy, it's for everyone, whatever your financial situation."

Investors will find a number of IFAs offering low or no cost advice sessions. As the Institute puts it: "Putting some simple financial plans in place and making some smart decisions to help achieve your goals and dreams in life is the first step towards really taking control of your life and gaining valuable peace of mind. Ideally we suggest that you find a professional Financial Planner to help you work through the six stage Financial Planning process."

But it concedes that this may not be possible, offering "basic steps to improve financial fitness" and promising self-help software on the site.

Finding a professional financial planner can be difficult – they don't operate on every street corner.  The institute's website shows just how few "accredited financial planning firms" – only a score for London and the South East, for example. To qualify for this listing, advisers need the equivalent of a post-graduate qualification in financial advice.

Using the definition of independent financial adviser, a label that can cover anyone from the Institute's members to local mortgage brokers, would produce a nationwide list of fewer than 10,000. If every adult in the country had one IFA meeting a year, it would have to be restricted to about a quarter of an hour.

Those with complex affairs and serious sums of money to squirrel away in pensions and unit trusts or needing inheritance tax plans have always been well served – they can afford to pay for advice.

But the vast majority will ignore both the Institute and the two decade old IFA brand.

IFAs tacitly admit the Institute's insistence on "It's not just for wealthy, it's for everyone, whatever your financial situation" is untenable short of creating a National Financial Health and Wealth Service.  They need to earn whether through commission or, increasingly, via per hour fees, just like lawyers or accountants.

Confusingly, the Retail Distribution Review, the far reaching changes ordered by the Financial Services Authority and due to come into force in January 2013, will offer new choices. Instead of the present independent and tied, there will be independent, restricted and simplified.  And as there are still consultations in progress on this, there may well be more moves to come.

For the moment, after RDR, advisers who remain independent must draw up a clear pricing structure advice and services with all products treated as identical whatever their commission structure. This means fees.

Restricted advisers including those working for banks and insurance companies will be able to offer a limited range of products and not charge fees.  Their expenses will be met in other ways including commission.

But what's around for those who can't or won't pay fees to RDR compliant advisers  – or who simply don't have enough resources to interest the restricted advisers?   These would include those with scant savings or just some millstones' worth of debt – probably the majority of adults.

They will get simplified advice from professionals who will offer investment and other recommendations on a basis where the customer does not directly pay and where the adviser tries to make up in volume for the low profit per client. Those receiving simplified advice will not get "holistic" help – so if they need a mortgage, the advice will focus on home loans and not on other areas in their finances which could be affected such as pensions or investments.

This level will still exclude many.  And if they need some financial thoughts, they will have to turn to online guides and generic help lines.

These include:

moneysavingexpert – in the UK top 50 websites by visitor numbers, according to website Alexa .  There is a massive amount of information and many tens of thousands of consumer comments. But while all the facts are there, it can be daunting for someone needing a quick solution to a problem.

Money Advice Service – this was set up by the government and paid for by a levy on the finance industry.  It went live in the spring, replacing the money made clear service which used to be on the FSA website. It tackles subjects such as divorce and separation, children, and job loss as well as more conventional insurance, pensions and investment. There is online advice and a phone line but the advice is generic – there will be no names so you won't be recommended a particular fund or account – instead it will says something like "consi
der fixed rate bonds" or "you might look at equity funds".  There are comparison tables that take in annuities, endowments, mortgages, savings and unit trusts. The site has not attracted as much traffic as hoped and there has been talk of redundancies among staff. And much of it is designed not to offend. The pages on controversial Payment Protection Insurance have no mention that this is an overpriced product which banks have been forced to pay back to consumers at the cost of billions.

Guardian Money  comes from the newspaper. It is well endowed with up to date material, blogs and best buys.  And while it lacks a sense of financial planning, it makes up for that with a wider variety of consumer issues. This week's discussion on prams and how much they cost can be just as vital for some as a consideration of pensions. 

Candid Money is run by former IFA Justin Modray. It offers a wealth of information including criticisms of products, advice on how to get commission refunds and a customer-generated review of advisers where they receive one to five stars. You can also take a test to see what you understand about money.

Cash Questions was set up by a group of financial journalists which answers questions including "hard to solve" financial problems. It is very independent and exceptionally idiosyncratic but many of the articles were written some time ago. It needs some more up to date material – it is still advertising a 2008 book on the credit crunch.

Money Expert has a fair amount of information – it comes from a firm of financial advisers in Manchester.

More from Mindful Money: 

RDR: Who is doing what to educate consumers?

Regulation: Will investors get a better deal if FSA delays new regulatory regime?

Shareholder activism: How to be an involved investor

Pensions: Investors still not aware of commission they are paying

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