Written by Adam Jones, Guest Blogger on Thursday 20 November 2014
Help me out
I recently read the FCA’s guidance consultation on retail investment advice (masochistic of me, I know!). While lots of it deserves debate, and indeed is getting plenty in the press, the aspect that struck me was the definition of personal recommendation and regulated advice. Notably, that when we begin to refine our actions based on what we know about the customer, begin to wander in to advice (and thus liability) territory.
I, like most people, don’t want to have to go through a big decision process when I pick investments. I know a huge chunk of the market is inappropriate for me as an investor and I also know that a platform provider could easily exclude this, based on what they know about me. Exposing my paltry retirement savings to a swathe of precipice bonds and derivatives would just be silly. I’d happily have a platform exclude these things on the basis that it knows I don’t have enough capital to go risking it.
I would also be quite happy for a platform to drive me through a decision process without my knowledge:
- He doesn’t have much cash, so that’s investment types X, Y and Z out
- He doesn’t seem particularly fussed about ethics so we will open up the ‘evil but high growth’ range for him
- He is young (relatively) so we can open him up to a bit more risk than others We know how much people like him want to retire on, so let’s factor that into our selection
- So based on this, we know that product and investment choices X, Y and Z will be about right for him
This makes my life easier. One of the key benefits of making my life easier is that there is a good chance I will put my money into savings and investments. Making savings and investments pain free means more people will be encouraged to save. With the recent TISA report Our Financial Future citing that 50% of the population have less than £1,500 in savings, this can only be a good thing.
I can’t help but think that anything which encourages saving over spending is a positive thing. The risk we run is that some people may buy products which aren’t a ‘perfect fit’, but then, saving into a pension with a relatively generic fund choice is probably far better than not saving at all.
Coming soon, the second part of this two part blog post GC14/3: Regulation, Advice and the moon on a stick - part 2