The Emperor with No Clothes: A Metaphor for Vanity, Deception, and the Importance of Truth in Financial Services

The “Emperor with no clothes” story is a metaphor for the dangers of vanity, deception and the importance of speaking the truth. It highlights how fear and social conformity can prevent people from questioning authority or stating the obvious. Ultimately, the story encourages critical thinking, honesty, and the courage to speak up, even when the truth may be uncomfortable or unpopular. What made me think of this?

When I read the Lang Cat report, I expected to be reading a report about the advice gap. Instead, I was reading a report about the sales gap. And, no, it is not so obvious that the townsfolk need your products – sponsors!

The Naked Truth: A review of the report findings from the perspective of a generic financial planning adviser.

Where do I begin?

The recently published report presents a comprehensive analysis, strategically timed to assist businesses in reaching Value-for-Money (VFM) assessment conclusions and aligning with the Consumer Duty deadlines. Notably, the report acknowledges achievements, providing commendations across the board. However, it also subtly suggests that directing product propositions towards individuals from less affluent communities could prove lucrative. It’s worth noting that such endeavours may be supported by sponsors and regulators who stand to benefit financially from increased Assets Under Management (AUM) revenues.

The report’s substantial nature reflects its intention to contribute to the ongoing assessment of VFM, a critical aspect of the Consumer Duty framework. By offering valuable insights and recommendations, it aims to facilitate businesses in evaluating their current practices and meeting regulatory obligations.

In addition to recognising commendable efforts within the industry, the report implies an opportunity to target individuals from lower-income segments with tailored product offerings. This approach, if pursued, may yield favourable financial outcomes for both businesses and associated stakeholders, including sponsors and regulators, who would likely experience a boost in AUM-based revenues.

It is important for businesses to carefully consider the nuanced recommendations outlined in the report, taking into account potential ethical implications and ensuring transparency and fairness in their dealings. By aligning their strategies with regulatory expectations and making informed decisions, organisations can optimise their market presence while upholding consumer trust and meeting the evolving demands of the Consumer Duty guidelines.

But here’s the thing everyone is missing…

There can be no A to M, without the A!

In this recent eye-opening report, it was uncovered that a whopping 70% of survey respondents admitted to having no investable assets beyond the recommended emergency fund levels. Whoops! Looks like savings were unintentionally overlooked as an asset class when defining investable assets. Don’t worry, it happens to the best of us!

But hold on to your calculators, folks, because there’s more! A staggering 91.5% of those surveyed hadn’t received any regulated advice in the past year. Wait, divide the one-off advice by two years? Ah, there it is—the annual figure we were looking for! Looks like advice seekers have been on a bit of a hiatus.

Here’s the hilarious twist: despite the lack of advice, a whopping 88% of those who did receive some guidance believed they got excellent value for their money. Who can blame them? No one wants to be labelled as unfit or incompetent, so applause and praise it is!

But let’s dive deeper into this enigma. It turns out the advised bunch happened to be the wealthy boomers. Ah, the industry’s secret confession—it goes for the low-hanging fruit, those boomers with pockets full of gold. Can’t blame them either, can we?

Now, here’s the plot twist: tens of millions of people out there seem utterly unaware that accessible advice services even exist! It’s like they’re living in a town oblivious to the difference between regulated financial advice and generic financial planning. Oops, someone forgot to pass the memo!

Surprisingly, there seems to be an assumption that all advice is regulated, despite the regulator’s handbook clearly stating otherwise. Silly, right? Oh, the trust game comes into play again! The financial services industry, bless its heart, has been the least trusted globally since the noughties. But hey, watch out, social media—it’s coming for you! And guess who’s ranked below bankers? Financial advisers! Even fintech providers couldn’t escape the trust downfall.

But worry not, my friends, for there’s a solution on the horizon! To tackle the unattainable savings and investments for half of the townsfolk with less than £25k in investable assets, enter the superhero known as “simple financial planning advice.” It’s like regular advice but with a simpler flavour. These plans should aim to address more pressing concerns like cash flows, debt repayment, emergency funds, and protection from non-monetary events. Priority checklist, activated!

Oh, and brace yourselves—70% of the underserved are highly unlikely to use regulated advice services in the future due to those pesky trust issues (38%) and the always inconvenient high costs (20%). Trust, trust, trust—it’s like a never-ending sitcom!

So, dear readers, as we navigate this wacky world of finance, let’s remember that trust is key. Walls need to be built, my friends—walls between advice and money, distributors and manufacturers, researchers and sponsors, and of course, sponsors and regulators. It’s the trust chestnut we must crack!

“There should be a wall, between advice and products, between advice and large institutions, and between our regulators and large institutions. We need integrity that is impeccable. Until we actually institute a way of bringing a good heart, great integrity, and a fiduciary relationship that is sustainable into the industry, we are going to fail. We have to make this change, and we have to make it now.”

– George Kinder, father of the financial life planning movement, 2019.

When it comes to retirement planning, pension consolidation, and unravelling the mysteries of investment risks, the townsfolk turn their hopeful eyes to the regulated adviser. It’s like summoning a financial wizard who specialises in gathering assets. Impressive, right?

But wait, there’s more! The townsfolk are in dire need of assistance when it comes to understanding value-for-money. Apparently, 37% of the underserved need to be convinced that they’ll actually save money before seeking help from a regulated financial adviser. Talk about a tough crowd! They also need guidance on how to pick a “trusted” adviser—no, not those websites that throw them in front of restricted advisers or push them into factfinder services. We need the real deal here!

Now, here’s the catch—many townsfolk lack confidence when it comes to making financial decisions. Fear not, my friends, for what we need are services that raise their financial activation levels. Though, let’s not forget that many of them are already highly financially activated! It’s like finding the balance between a confident superhero and a reluctant sidekick.

But hold on tight! Complex financial matters should indeed be handed over to regulated financial advisers, but that’s only the case in one out of four situations. Plus, let’s not overlook the 7% who neither have the time nor the inclination to navigate the financial maze on their own. They’re in need of a financial sidekick, too!

Now, here’s a little secret—giving clients peace of mind about their financial future isn’t a regulated activity unless it’s tied to selling specific investments. Shh, don’t tell anyone!

Surprisingly, 61% of the townsfolk disagree that managing money and making financial decisions is challenging. Confident bunch, aren’t they? On the flip side, 53% claim they don’t need any help at all. Well, well, well, we have some aspiring financial experts in our midst!

Ah, but fear not, for there are advice firms out there—around 39% of them—playing the noble, pro-bono role of educating the underserved customers, helping them make the best decisions all by themselves. That’s what we call generic financial planning advice, my friends!

Now, let’s take a moment to realise that the 95% of the unserviced townsfolk represent a colossal opportunity for someone—we just need to figure out who and how. Cue the superhero music! Or wait, maybe we don’t need a superhero after all. Maybe what the townsfolk really need is good ol’ generic financial planning advice. Tools and tactics, my friends, tools and tactics!

And guess what? Personal circumstances don’t always need to be taken into account for advisers to modify how they present information. The townsfolk have got that covered themselves, using low-cost end-user financial planning apps, financial education libraries, and community planning services. They’re practically superheroes in disguise!

Here’s a little secret for the town: Divide the cost of a generic financial planning adviser’s time by the large number of people served (definitely more than 136), and voilà, the advice costs fall to next to nothing. What a bargain!

So, all those fancy things you hear about adding adviser alpha? Turns out, it’s the work of our friendly neighbourhood generic financial planning adviser. They’re like hidden superheroes, saving the day one financial plan at a time.

Hold your horses, folks, because we’re about to debunk a piece of advice that’s just as misguided as wearing socks with sandals. Brace yourselves!

You see, there’s this statement floating around—”never take advice from an unregulated consultant.” But let me tell you, that advice itself is a bit like asking a goldfish for stock tips. Clearly, it was penned by someone who missed their appointment with the FCA handbook.

So, here’s a better statement that’ll make you nod your head and say, “Aha!” Drumroll, please! “Never take regulated advice from an unregulated consultant.” Ah, that’s better, isn’t it?

Let’s break it down, my friends. The FCA—the superhero regulator of the financial realm—keeps a watchful eye on the distribution and manufacture of regulated products. So, if there’s a sturdy wall between advice and product, you can rest assured that the process has integrity you can trust by design. No shady dealings here, folks!

And if it’s competence you’re after—because who wants advice from a financial fumble-fingers—worry not! The professional bodies have got your back. They ensure that advisers are equipped with the necessary knowledge and skills. It’s all evidenced by their stellar examination success rates and industry experience. That’s right, we’re talking about the crème de la crème of financial expertise!

So, there you have it, my wise and savvy readers. Remember, when it comes to generic financial planning advice, stick with the generic financial planning gurus and let the regulated financial advisers—aka sellers—play hopscotch in another digital sandbox. Now go forth, armed with knowledge, and get ready to conquer the financial world like the savvy warriors you are!

The Emperor with no clothes:

In a kingdom not so far away, there lived an emperor with an unquenchable thirst for fashion and a boundless love for his own reflection. Enter two crafty weavers who possessed a unique selling proposition—clothes so extraordinary that they would be invisible to anyone incompetent or unworthy of their position. Talk about exclusivity!

The emperor, captivated by the allure of this fantastical concept, wasted no time in hiring the weavers. Money exchanged hands, and the stage was set for the creation of a one-of-a-kind outfit that would catapult the emperor to the peak of fashion fame. Little did he know, the weavers had a different kind of magic up their sleeves—namely, the art of doing absolutely nothing.

Days turned into weeks, and weeks into months, but the weavers were masterful in the art of deception. They pretended to toil away diligently, spinning their imaginary fabric and weaving intricate patterns, all while snickering behind the scenes. The emperor, blissfully ignorant, eagerly awaited his magnificent attire.

Finally, the moment arrived—a grand parade through the streets to showcase the emperor’s supposed sartorial splendour. Clad in nothing but his delusions, the emperor strutted through the town, basking in the adulation of the townspeople. After all, who wants to be labelled as unfit or incompetent when the emperor himself is parading in his supposed finery?

But hold on, dear readers! Fate had a mischievous twist in store. Amidst the crowd, a young child, untouched by societal pressures and unburdened by the need for political correctness, blurted out the obvious truth. “But he has nothing on!” cried the child, cutting through the sea of polite pretence. Slowly but surely, a ripple of realization spread through the crowd, and the truth could no longer be denied—the emperor was stark naked!

And so, with a mix of shock, laughter, and a touch of relief, the townsfolk collectively came to terms with the naked truth. The emperor’s illusion had been shattered, and reality had triumphed over pretence. It was a lesson learned the hard way—a reminder that appearances can be deceiving and that sometimes, it takes the innocent eyes of a child to reveal the naked truth.

And thus concludes our tale of an emperor, his invisible clothes, and the timeless lesson that even the mightiest can be caught in a wardrobe malfunction. Until the next whimsical adventure unfolds, dear readers, keep your eyes open, and your laughter ready, and never forget to question the garments of authority.

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