George Osborne’s reported comment that "People who have saved throughout their lives, saved for a pension, these are responsible people who are capable of making decisions - with good advice - about their future," cannot be argued with.
However the ‘with good advice’ part of that sentence is critical. More work is required to define what ‘with good advice’ actually means and IFP will add this to our ongoing discussions with FCA and MAS. It may be a great burden to many people to have to make this decision and while face to face impartial advice sounds like it should be ok, face to face impartial advice doesn’t necessarily mean good advice.
Given the limited budget of £20m a year that has been announced in relation to this ‘good advice’, we are concerned that, with c. 320,000 individuals retiring every year, the c. £64 per face to face meeting will not result in a regulated, expert-led planning process that delivers what consumers need in relation to their long term plans.
The moves to simplify the ISA rules and increase annual contribution limits are very welcome, although they increase the need for consumers to understand the different asset allocation options open to them, with the risk/return discussion to the fore. Consumers need help to understand the different types of risk and the implications they may have on their financial situation. This is especially so in a low interest rate environment given the potential this brings for reductions in the real value of assets.
IFP maintains that planning and saving for the future is most effectively carried out with a set of clear goals having been established. Also, reviewing progress towards these goals should be a regular event and not a single moment in time. Advice at a single moment in time raises the spectre of further mis-selling or mis-advice if it is not facilitated by suitably qualified and regulated individuals. In this context, we need to be clear whether the ‘face to face impartial advice’ will be fully regulated advice or not.
Steve Gazzard Chief Executive of the IFP said,
‘These changes mean that ongoing Financial Planning advice provided by Certified Financial PlannerCM professionals and by Accredited Financial Planning FirmsTM has never been more important for those consumers approaching retirement. The Budget changes give consumers the ability to access their accumulated savings and investments much more flexibly in future. However, the need for them to understand the long term implications of such decisions is essential. The process a Financial Planner takes clients through, which includes cashflow forecasting and various ‘what if’ scenarios, supports this understanding in a way that a single moment of time piece of advice can never achieve”.
