Simple beats Complicated every time

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Countdown to Extinction

If I was still just a UK Financial Adviser I would have needed another job by now. Financial Advisers existed in the late 80’s and early 90’s as the gate-keepers to financial products. They all died out like the dinosaurs did, killed off by progressive regulation and Google.

They were the brokers of life assurance, mortgages, PEP’s and Pensions. They assessed the complex product charges and the past performance. They simply ran a beauty parade of a customers potential Insurance, Mortgage and Investment suitors and the ‘allegedly’ recommended the one that paid them the highest commission. They made the introduction, they got paid and then they made off. Much like the Viz character “The Independent Financial Adviser of the Lamp”.

Today there are less types of financial products in existence, all with simpler charging options. Charges have been capped, providers continue to exit as the margins get skinnier. Expensive product charging structures have been banned. On-line searches become more sophisticated everyday. The answer is Google, now what is the question.

The Survivors

If you continue to operate in the investment world today, you can’t just flog a product for gain, you must offer a long term service. You have to “add value”. (I hate that phrase and cannot believe I have just used it). We are long term holistic financial planners, no longer financial advisers. It’s at least a decade ago since I was introduced as “my insurance man”.

OK, let’s dust off the crystal balls and predict why the next extinctions will occur.

Robo-Advice

We have all seen Arnie in The Terminator. Now better believe it will happen. Not just to us, but to all of those in any profession. In the long run Robo-Advice, the machines, will see us all off. Not soon, probably because most investment businesses today look after older, less technologically au-fait clients. It will be difficult for them to adopt the latest technology.

But let’s look at me for example. I’m 54 and three quarters. My first operating system was MS-DOS. Me and Windows go back to 1995. 20 years of pointing and clicking. I’m oldish, but still very technically competent. If I was not in the business would I use an adviser? I’m sad to say that I wouldn’t. I’m not alone, and many people younger than me spend more screen-time today than they do sleeping. The smart phone and Uber killed-off taxi firms, the smart phone with Fintech will surely kill advice firms.

Simpler Products

I’m not a conspiracy theorist. But I do know that there is a huge alien outpost on the dark side of the moon and they are holding Elvis, Shergar and Princess Di captive. You don’t need to believe in outrageous ideas to understand our regulator has got it in for financial advisers. They understand that they can control financial advice on-line easier than trying to control all of the thousands of financial advisers who give advice individually. The FCA are achieving control, bit by bit, by dumbing down financial products making on-line take up easier. For the vast bulk of the UK population the only products that matter, are an Auto Enrolment pension via Nest and an ISA. I know there are now NISAs, JISAs, HTBISAs and hot off the press LISAs, but they all share a common simplicity thread. No capital units, no early redemption penalties, capped charges, default funds…..

“How can I help you today? An Auto-Enrolment Pension or an Auto-Enrolment ISA”. I believe it’s coming via a battered red briefcase to a Budget near us very soon.

I’m upbeat.

I think my future business is safe, but I couldn’t achieve it all again today. How do you become Independent Advice Ltd. today? It’s easy. You just need to have started almost 30 years ago. (hat-tip to Lucien Freud)

And my conclusion

The future is for the Investment Managers who manage assets and don’t need to recommend products. You don’t believe you can manage investments? Haven’t you have always done it?

Take control of client returns and the client will always return.