Google: the “Wild West” of Independent Advice

When all you are looking for is the best advice or best outcome for your finances.

Investors face ‘wild west’ in hunt for independent advice, is the conclusion of Telegraph Money 22/02/20; As lead generators that advertise on Google against such terms as “find an independent financial adviser” pass the details on to restricted advisers, such as Tilney and St James Place.

The suggestion is that restricted is a sales focus, as restricted advisers are paid to sell certain products, whereas the independent financial advisers (IFAs) are “better” and “should give the best outcome” as they can choose technically from the whole funds market; Though in practice a dedicated analyst chooses the product for them.

Here’s the thing. The vast majority of Independents – whose fees are contingent on product sale or a percentage of product sold – are also “paid to sell product”.

And, the independents aren’t actually “independent” of product providers, at all, so long as they hold “agency agreements” with product providers, which all financial intermediaries do! That is, all regulated financial advisers are not strictly, i.e., contractually, “independent” of product providers in the true sense of the word, and unless they are the rare breed called fixed-fee financial advisers, their focus is on sales too.

The West just got wilder!

 So! here’s the real shock…

When a member of the public goes on to the website looking for “better advice”, or the “best outcome”, their details are passed on to agents of either a few or multiple product companies, where the focus is principally on sales.

And, conflicts were highlighted in an Financial Conduct Authority (FCA) paper published this week, the financial intermediary regulators, which said: ‘We have concerns that advisers (restricted and independent) may be recommending products with an ongoing advice requirement, potentially instead of more suitable options that do not have ongoing fees.

Here are some safer alternatives.

  1. The fixed-fee, fiduciary financial adviser.
  2. The non-intermediating financial planner.

The former charges a fixed fee for the job. The fee is not contingent on product sale or amount of product sold. Furthermore, the adviser takes an oath to place client best interest first. If you are using an intermediary, whether they be restricted or independent, check that they have a contractual obligation to place your best interest first and are rewarded without conflict of interest by way of biased incentives.

The latter is not an agent of product companies, they are not therefore regulated. They are therefore unable to give advice to you on whether to buy or sell a specific investment. They can give generic advice and financial education. This is often referred to as the ‘non-advised’ route.

With the non-intermediating financial planner, you must check on their experience, expertise and ethics, to satisfy yourself of the character of the adviser as a regulator would have done if they were regulated. This should be clear and obvious from their bio, social presence and reputation. And, check too their fiduciary responsibilities under their terms and conditions.

“But, I want someone to pick a good product for me.” You might say.

Here’s the thing …

American economist Eugene Fama under his efficient-market hypothesis concluded:

“It is exceedingly difficult, even for a professional investor, to beat the market by trying to predict stock-price movements in the short term. Therefore, it is much better to invest in a broadly composed portfolio of stocks instead of engaging in a futile stock-picking effort.”

In short, product-pickers don’t add value after fees are taken into consideration.

It is proper financial planning that adds real value.

According to the FCA’s Sector view for 2020, ongoing restricted and independent intermediary advice charges have increased by 19% to £3.4 billion in 2018.

I do hope these clients are receiving proper financial planning and aren’t simply paying for product-picking. Or worse, paying without receiving any ongoing service whatsoever.

Non-advised saves the cost of intermediation. 60% of non-advised consumers choose to use platforms to build their own portfolio from a wide range of funds and shares.

How? With generic advice and financial education:

Like the Good Money Guide,

Morningstar fund research and insights

The Evidenced Based Investor

Or Which? Guide to money and investing.

It’s not that difficult to set up a good, low-cost self-maintaining, broadly composed investment portfolio in less than an hour. And, simply not have to think about it.

And save 1% per annum on intermediary charges, by going non-advised route.

For example, Which? found in their report with £500,000 worth of investments in a ‘moderate’ risk portfolio, a reduction of 1% per year in total charges amounts to a saving of £75,000 over 10 years, rising to £240,000 over 20 years.

What you need though is a financial educator you can trust, so you can judge the good information from the financial pornography of Google’s Wild West.

The Wild West in hunt for advice.

The Peddler and the Planner

“What I want from you,” said the investor. “Is to do better than the market.”

The Planner turned to the investor and stated, “I can’t do that, but I can put in place a plan to make you happy.”

“I want you to make me rich, not happy.” Replied the investor.

The Peddler stepped in, “We specialise in financial planning supported by investment strategies that achieve market-beating results.”

“How much does it cost?” asked the investor.

“Well with my schooling, my boisterous marketing hype, my pseudo-scientific evidence, my social influencer (a shill) … up to 2% per annum more than the market.”

“Bargain.” Replied the investor.

“After 25 years, that’s 50% of your life savings gone up in smoke.” Cried the Planner.

The Peddler laughed and left town before his customer realised, he had been cheated.

American economist Eugene Fama under his efficient-market hypothesis concluded:

“It is exceedingly difficult, even for a professional investor, to beat the market by trying to predict stock-price movements in the short term. Therefore, it is much better to invest in a broadly composed portfolio of stocks instead of engaging in a futile stock-picking effort.”

Still there’s a big market for futile stock-picking effort, drastically overpriced and falsely advertised. Strangely allowed. Even preferred by enthralled investors, surprising this day and age.

I educate my clients. I help my clients understand how things work. They then avoid miracle elixirs.

A wall between advice and product is a wall between planning and intermediation. If you split a firm like this and allocated revenues to where value is really added, you’d see that a stock-picking business isn’t viable when there’s market integrity.

Be a Planner.

Join LinkedIn Group for details Non-intermediating financial planning network #NIFPN

The Peddler

The Times They Are A Changing: What’s the outlook for Financial Planning for the next 10 years.

Come gather ’round people wherever you roam and admit that … the old order is rapidly fadin’.

What financial planning is becoming in 2020’s is very different to what it has been. It is becoming more like … well … “planning”.

What it was – the 2010’s.

Maybe financial planning used to be very returns focused. Financial planners would talk to eager eyed punters about moving investment returns beyond market performance. The financial planner, out of necessity following a series of scams and scandals, was a financial intermediary registered and regulated by the Financial Conduct Authority, in order to protect the public from the products pushed. The financial planner was once a product pusher.

Perhaps financial planners were essentially salespeople.

Potentially their worth was all tied up in the product.

The principle value-add they placed in front of their bewildered clients was based on returns they had absolutely no control over. At any instant, they would be obsessed over whether the return line was up or down. They placed their entire worth in the products they sold and how well they did or did not do.

Possibly the goal the financial planner set for their client was making more money.

The client would ask the financial planner to “help me maximise my returns”.

The financial planner would try to beat the market. They would focus on returns. Of course, they had no control over them. So, they would take an inappropriate level of risk or handpick stocks in a fruitless effort to beat the market. They failed miserably. As half of the market always failed and those that won this year did so by luck and soon became next years failures (or cunningly hide their disappointing returns).

Their pitch was all about performance. There publications, financial pornography.

The financial planner would bore their clients talking about their products and the performance. They talked money. They talked just about returns.

When it came to the review, the conversation would be about what had happened. It would be about the performance relative to this or that. The client would talk about an aspect of their portfolio. For example, they might ask the financial planner to review their pension. The financial planner and the client, all they would care about is the stock market. The product. The investment.

The old financial planner would charge a fee contingent on a percentage of product sold plus an indecent ongoing percentage of assets under management, rarely justified by service delivered. The fee structure was vague, and the client didn’t know the full cost.

What it will be – the 2020’s.

Picture this. The new financial planner will care about their worth to the client. They will describe planning as holistic. They will care about how best to coach the client and support them with their financial plan, that’s as robust as possible.

Here, they define life goals and help the clients to make the most of their money.

Imagine this. Their worth is in the plan.

What if the new financial planner is a behavioural coach? They act as a coach and mentor to keep their clients on track with their plan. They aim to understand their client and their needs. They aim to treat their client as the customer, and not the money.

It’s all about client education.

It’s about the use of up-to-date technology.

The financial planner focuses on goals and what’s required to meet them. The focus is to make clients happier.

Using coaching skills. Building long-term relationships. Reviewing aspirations. Looking at where the client wants to get to and delivering that. Some may call it lifestyle financial planning; others call it simply “life planning”.

The new financial planner will present a financial plan, “This is your plan of where you want to get to, so how do we get there?”

The client appreciates having an actual person they can phone. In the event of divorce. Or bereavement.

Financial planners are dealing with people and their emotions.

The aim of the new financial planner is to help their clients find futures that they didn’t even know existed.

The client will ask, “Can you help me to stay in control of my emotions?”

The financial planner’s job is to understand their clients and their unique needs.

The new financial planner will charge a fixed fee based on time taken to complete the task. The fee structure is clear, so the client knows what they are paying for. There will be no conflict of interest.

Instead of looking at returns, stock-picking and timing markets, the financial planner looks at ideal life, aspirations, dreams, what if scenarios, preservation of wealth, segmenting pots by life need, managing risk-weighted returns over a life cycle through asset allocation, maintaining cash reserves, smoothing income payments and the right ownership of assets. The financial planner talks through various tax allowances and makes bespoke plans, which include lifetime cashflow forecasts.

The financial planner’s job is to help their clients understand the markets and what they mean to them. Implementing tax angles that add value along the way.

Clients are unique and no longer fit in model portfolios. Business owners and entrepreneurs have volatile incomes from their businesses. Drawdown is no longer something that just happens in retirement. Accumulation is no longer something that just happens during working life. Succession is no longer something that just happens on death.

Older clients are living longer, which bring new health and inheritance issues. Legacy is no longer just about money!

The new financial planner asks, “What’s your biggest financial fear?”

“What do you want to achieve with your money?”

The new financial planner acts as a coach. Mentor. Keeps the client on track.

The focus is on wellbeing. Rather than wealth.

The focus is to avoid the highway robbers and enjoy wealth in every area of your life.

The new financial planner communicates and explains financial concepts well. They present themselves in a professional manner. They help their clients to reach their financial goals. The plan is delivered, and the adviser helps the client to stay on track and weather the shocks.

The financial planner is a life planner, considering a wider impact that emotion may have on money and that a legacy remains of the client’s life work.

The world is to be a better place for the client having lived.

The new financial planner has a good reputation and has positive reviews. They are knowledgeable on tax and the full consequences of investing. They are approachable and easy to talk to. They are easy to get hold of. They are trusted.

The new financial planner is a fiduciary. They keep their client’s best interest in focus, without conflict of interest with unbiased advice.

The new financial planner communicates and explains financial concepts well. They have all the relevant skills and knowledge.

The new financial planner has an efficient delivery of service at the right price and with a choice of service levels.

The new financial planner says to their client, “There are good decisions you can make. They may not look good, but they are the right ones. I am here to communicate what’s going on and what it means to you.”

The new financial planner is a communicator.

As Bob Dylan once said, “The times they are a changing.”

I’m sure you would agree, if the adviser of 2010s is where we were and the adviser of 2020s is where we want to be, then we need a system, vehicle or solution to get you there.

That’s what the Academy of Life Planning delivers.

We are going through a changing role of a financial planner. What it was, was a financial intermediary. What it has become is a non-intermediating life planner.

We no longer need to intermediate. The key these days is low cost investment, low tax impact and wise asset allocation. With product management outsourced to do-it-yourself passive retail multi-asset funds on platforms, that outperform most intermediated offerings after charges.

Client’s save 1% to 2% per year on fees, which over 25 years adds 33% to 100% on their life savings.

At the Academy we deliver non-intermediating financial planning services to hundreds of clients worldwide. We also train, coach and mentor the UK’s most trusted financial planners. For details, check us out at:

AoLP Founder and CEO Steve Conley, social-media moniker WharfWizard