"How do we solve a problem like Maria?"

 A blog post for Financial Professionals

I'm sorry to use the Sound of Music to lure you in. In this instance, Maria is 23yrs old and wants Investment Advice - how do we give that advice to the 18-30 year olds, or do we allow Social Media to dictate the narrative? Helena Wardle - A Senior Partner at Smith & Wardle LLP has been looking at this for a while. Helena decided to pop this into my head and see what I could come up with - so here I am, asking for a discussion and nothing else. This blog represents my thoughts and the reactions I've seen. No one else is to blame!!!

The 'Icarus theory' ("I keep buying stocks as they go up and just when I think it's going to fall, I sell out" boasts one Tik Tok investor) is an interesting one I've seen and absolutely blasted by Financial Advisers. Perhaps they will go to Bitcoin - another investment blown to bits by advisers. I have also read an Investment Firms' paper, where an Investment Manager wrote a 16 page article on it, explaining how they saw it as speculation and not investment. 

So, reasons why not.

We could point them to Nutmeg, Moneybox, Boring Money, Hargreaves, AJ Bell Self Invest and a plethora of other places, but equally it seems, we are keen to point out the costs, charges, no advice etc etc on this too.

Our 18-30's are used to monthly payment plans/subscriptions - From Fitness to food, to cabs and clubs -it's all pay monthly.

In the main, we see an 18-30yr old by way of introduction from Mum and Dad whom we've given advice to for years and as part of the service, we'll set up an ISA, Pension etc. 

But what about a direct service to them? our initial advice fee - be it fixed or percentage - in my opinion - will not work. They may want to start paying £150p/m into an ISA for example. Would we have to go back to 'Nil Allocation' for a year or two, to cover the initial fee? Or ask them to pay another £150 per month to cover it?

We know there are funds that are cost effective - platforms too, but how do we get involved? how can we fit into that 'monthly payment plan' for advice and education?

If we could, a client wouldn't be with us for just for 20-30yrs, but potentially 50 or 60 years and beyond as we repeat the process for their children.

So my discussion point is this - How can we do it? The benefits are massive. With education, we can help our young clients avoid scams, which will have obvious benefits to our profession as well as those of our new and existing clients.

We build potential longevity into our businesses, securing clients for the very long term and that will of course, mean greater value in our business for us while we are in our business and for when we decide to exit.

Or do we keep pointing them to the aforementioned places, only to point out the shortcomings?

How do we solve a problem like Maria?

How much is too much for Financial Advice?

 

Ok, I finally cracked on the weekend. There was an article written about Adviser Charging - specifically the ongoing advice charge - and the link was posted on twitter causing one financial journalist to tweet "A percentage based, Ongoing Adviser fee is daylight robbery."

I don't normally rise to such things, so whether it was lockdown, home schooling, not being able to see my big kids or a combination of everything, I decided I was going to write a blog, rather than post a video (my chosen path of communication on social media).

Income is a sensitive issue I get that and whatever you do for a living, if someone said "you're charging too much" I'd imagine it would create a response of some description - even no response is a response!

But to answer the question, we have to look at the value the client feels they get. The fact this article uses a clients story and their experience, suggests the client wasn't feeling or seeing the value, in which case, one could say that whatever the adviser was charging was going to be deemed too much?

A percentage fee ongoing? if markets go up everyone benefits, if it goes down, the clients value reduces, as does the income for the adviser - is that fair?

Perhaps a fixed fee for ongoing work is fairer? if markets go up the adviser gets the fixed fee and nothing more, if it goes down, the adviser still receives the same fee - is this right?

There are advisers who sit behind the desk, stress testing the portfolios they recommended, making changes every quarter. There are others who outsource that work, freeing their time to help a client with their future plans. Finances at the core, but looking to really understand why someone is saving or where they envisage being when they retire and how much will they need each year to do just that, ensuring the future finances are in good health and if not, suggesting changes that need to be made to help. There are advisers that do all of it.

Should those that do everything charge more?

Every client is different. Some of my clients pay me a fixed fee per annum, some pay me a percentage of the assets I look after, some only pay me when they want to meet me.

It isn't 'Daylight Robbery' its is a charging method that doesn't work for that individual and the charge in the end, becomes too much for Financial Advice.

This blog is the thoughts of the author and is not to be considered as Financial Advice

Victor Sacks is an Independent Financial Adviser at VS Associates Ltd an Appointed Representative of Sense Network Ltd.

VS Associates Ltd and Sense Network are authorised and regulated by the Financial Conduct Authority