Financial advice is not available to everyone, and more needs to be done to address this.
The UK financial services industry and its advisers in particular are highly skilled at providing advice. And those who are able to access this advice benefit enormously from doing so. They have peace of mind knowing they are in control of their financial affairs and professionals who completely understand their needs and wishes are guiding them. This is something surely everyone desires.
But it seems unlikely, given the way the industry is currently structured, that any but a wealthy few will ever have access to the full range of advice and guidance from which all of us could benefit.
The industry has many wealth managers, but few wealth builders. I suppose that’s not surprising, and it’s easy to understand why an industry should have grown to meet the investment and financial advice needs of the wealthy. But there is more to financial advice and wellbeing than this. For the ordinary citizen struggling to make ends meet in an increasingly uncertain world, financial guidance and advice have never been more necessary.
Emergency Financial Advice project gets off the ground
In the longer term, it would obviously be a good idea if people were taught at school how to competently manage their financial affairs throughout their lives. But that solution, even if feasible, is generations away and will not help the tens of millions at work today to become financially savvy.
For financial capability to be passed on to the current workforce, something far more revolutionary must happen.
The obvious place for that to start is through the one wealth-building process already in place.
Since the introduction of automatic enrolment eight years ago, most employees in the UK have had access to a wealth-building mechanism – a company pension scheme. Building on that and making a wider range of benefits and services available in the workplace, including access to regulated advice, is the one sure way to help people take control of their own finances.
The workplace is where we earn our money, but it could also be where we learn how to manage our money and make the most of it.
The challenge for our industry is to take the excellent skills and processes that have been built over many decades to help our wealthier citizens manage their finances and make them available to all.
The information required to help people understand personal finance is all there in the industry today, and the technology to make it happen exists too.
For those of us currently at work, the need to understand and control our own finances is arguably greater than ever before.
All that’s required is for the financial services industry to want to achieve this.
Steve Bee is director at OpenMoney Benefits
Steve, I think in proposing that a kind of financial education component could be built on to people’s workplace pension schemes, you’re trying to graft an apple onto a pear tree.
By far the most important reason why auto-enrolment has been such a success is that it’s the very first long-term savings proposition that doesn’t require a whole lot of financial education to make it work reasonably well for its millions of policyholders. In that sense, I fervently hope that it points the way to a future where other kinds of financial service – in insurance, in borrowing and lending, in banking and so on – are equally effortless for ordinary people to operate, without the need for all this “education” that industry people are so keen to foist on us.
By contrast, your workplace education proposal looks backwards, to a past where the huge majority of us are excluded from financial decision-making by rafts of complication and opacity, and the only way we can achieve any kind of control is to take on the industry on its own terms
Auto-enrolment is our one big success story in the vitally important challenge of downskilling our products, rather than upskilling our customers. Your proposal takes us in exactly the wrong direction.