Carole gets off the couch to take her thoughts about the value of financial advice out for a run, and concludes that women need to feel more comfortable (back to the couch, then)
I’m not a runner. Running makes me feel like my brain is rattling around in my skull. It makes me feel sick, weak and slightly anxious that I may never get enough oxygen again. At school, we were forced to run 1500m once a year. I would have called a cab if I’d thought I could get away with it.
A slight shift
But, hello! Two runs into week 5 of Couch to 5K and I can feel a slight shift happening. You’ll never catch me admitting that I’m enjoying it but today I felt, for the first time ever, that I just might be able to tolerate it. If that’s what 10 weeks of lockdown does for you then these are, indeed, unpreced… (it’s okay, I’m not going to say it).
Challenging mindsets to face
By the time you are my age, a mindshift is not something that happens overnight. Years of ingrained attitude pull rank over unfamiliar ideas and reign supreme until such time as the new thoughts actually get their feet under the table and start looking like one of the family. If you read my very first blog post (Why I am Talking Finances With Women) you might remember the anecdote about a male speaker at a technical conference for advisers who spoke of a typical client couple where the wife’s first thought of what to do with spare capital would be “to have a new kitchen”. It was in this moment that I realised that if I was going to be part of this profession I would have a number of challenging mindsets to face – certainly from within the financial industry itself, but also from within the community of women who fear – sometimes rightly – that the process of getting financial advice will be as alienating an experience as having your head gasket replaced.
A relationship of unequals
If it were just a case of working on a style that is neither intimidating, alienating or patronising, then that feels eminently do-able. But the reasons why women still don’t seek advice on their finances in the anything like the same number as men go deeper than that. Women I have spoken to are unclear in their minds about what a financial adviser does, sometimes confusing them with stockbrokers. They assume that the charging structure will be opaque – and out of their league – and that assumptions of knowledge will be made, which they will neither have nor feel able to challenge. In short, they feel that it will be a relationship of unequals, and this makes them uncomfortable.
Professionals must be ‘raking it in’
I think the confusion about charges is key here. If we understand what we are paying for, we can make a judgement about whether or not we think it is worth it. When I think about the types of fees that have occasioned a sharp intake of breath in my life it has been for services that I don’t fully understand: solicitors’ conveyancing charges, estate agent fees, the additional admin charge on a mortgage application, electrician-y stuff… How many times have we glibly assumed that the professionals involved must be ‘raking it in’ – without really appreciating what it is that they do?
Memories of the old way of charging linger
It perhaps doesn’t help that, a few years back, there were massive regulatory changes to the way financial advisers are allowed to charge for their services. Before these changes, it worked more like a travel agent, where a single amount due was disclosed to the client and the various commissions were paid out of that without the client really being aware of it. I think the memory of this way of doing business lingers in the population – after all, if you are not in the industry, or partaking of its services, why on earth would you clock something as mind-blowingly dull as a ‘regulatory change’.
More transparent, but still confusing
So it is perhaps not fully understood that, these days, all fees charged have to be broken down and disclosed to the client. But while this is undoubtedly a good and transparent thing, it doesn’t address the issue of fully understanding what your money is buying. It gets even more confusing if your adviser recommends some sort of investment ‘product’ on which fees are charged separately from the advice and are dispersed in a confetti of acronyms all of their own.
Can I do it myself?
For me, a key question when deciding on the value of something is whether or not I a) could and b) would want to do it myself. Going back to the solicitors’ conveyancing fees, that’s something I don’t feel I could do myself. I very definitely didn’t go to Law School and would have zero confidence that I was getting it right. Estate agent fees fall slightly under that category as there is less expertise involved than with a solicitor and there are cheaper internet options available, but I might not want to spare the time or the hassle of acting on my own behalf and I am paying for their list of potential buyers – something I couldn’t rustle up myself.
What is a full financial plan?
So where does financial planning sit in all of this? In the ‘A bit more understanding’ section below I outline some general benefits of paying for financial advice, but, in a nutshell, a full service is where a team of professional and regulated advisers, researchers and administrators trawl through your finances, encapsulate you dreams for the future and identify your needs so as to put in place – and monitor – the right kind of financial plan. Importantly, you are protected if you lose out because a regulated financial adviser sold you something that was not suitable for you.
Women don’t feel they have enough wealth
That might all make perfect sense but, with all the understanding in the world, I think that where women are concerned there remains the mindset that we don’t have enough wealth to warrant this service. There is logic to the argument that, because women earn less, have less in their pensions but live longer than men, they are the ones in more need of financial planning – to navigate the anything-but-linear nature of their career paths and earnings power. But then the logic breaks down because: we earn less and have less in our pensions and so feel less able to afford it.
When the stakes get too high
Questions that came up a lot in my ‘Women save, men invest’ workshops (when social proximity was a thing) are, how much money do you need to make the service a financial adviser offers worthwhile? And, what other ways are there of investing that don’t cost as much? To the first question, it’s a personal decision, but you will hear the figure of around £100,000 mentioned – a point at which most people would agree that the stakes have got high enough to feel you want some professional input. We could debate that figure but, for now, let’s go with it.
Additional pension contributions or DIY investing
What can you do, then, if you have made the decision to invest, but have nothing like that sort of money? For some, making additional contributions to your workplace pension is not a bad place to start. Professionals are doing the investing for you and you will get tax relief on the amount that goes in (see Get down and dirty with your pension). If this isn’t an option – or if you are investing for something other than retirement provision – there are DIY choices on line that range from making the decisions about where to invest entirely on your own on a platform to so-called robo-advice where you are asked questions about your investment timeframe and tolerance and capacity for risk and loss and directed towards an algorithm-derived suite of options. I have included a few definitions in the section below but there is also a wealth of information on line and a good place to start is The Money Advice Service.
Family and friends won’t judge you
For others, let’s be honest, turning to family members or friends for help is often the preferred way. If you see that someone you trust has had success in reaching their savings and investment goals – or maybe they are in the finance industry themselves – you might just ask them. After all, you feel most comfortable with these people and you know you can ask as many supplementary questions as you need without feeling judged.
Advice service where help is freely given
If a financial advice service is going to reach women who prize feeling comfortable about what they are paying for above all else then it needs to be acknowledged that these women may have an entrenched mindset about planning and investing – a mindset that says this is a male domain that is not ‘for me’. As advisers, we won’t change that mindset overnight (think marathon, not sprint – I had to get a circular reference to my running in there somewhere!) but what we can do is position ourselves in the ‘friends and family’ bracket where help in gaining confidence and understanding is freely given.
4 June 2020 firstname.lastname@example.org
All opinions are those of Carole Haswell and do not constitute financial advice
A bit more understanding
Some general points about paying for financial advice
The more money you have to invest, the greater the cost benefits of taking advice: This is because the charges that you pay an adviser upfront will represent a smaller proportion of a larger fund; there might also be tax considerations that you are not aware of with a larger amount of money
Not all benefits of advice are related to cost: For some, knowing that a professional has set them on the right path outweighs the initial cost – especially when saving for the medium-to-long term (over 5 years); having an adviser can add a level of comfort in times of market turbulence
Common reasons why people pay for advice: saving for retirement, a financial ‘health check’, understanding their pensions and the options available to them, investing in the stock market
Some useful definitions
Advised/regulated (you can claim compensation if you are sold something unsuitable for you)
Financial adviser: You pay a fee for advice on your finances and, if required, putting any recommended actions into practice. You can also pay for an ongoing service to make sure that what has been recommended to you remains the best advice as your circumstances change over time.
The adviser may not be independent, which means that they will recommend products and investments from a limited range (eg in a bank)
Independent financial adviser: You pay a fee for advice about your finances and, if required, putting any recommended actions into practice. You can also pay for an ongoing service to make sure that what has been recommended to you remains the best advice as your circumstances change over time.
The adviser can make recommendations from across all of the market and is not limited to certain products or investments.
Financial planner: Mostly, this is another name for financial adviser. The service will offer a holistic approach to your financial circumstances and needs.
Wealth manager: This is pretty much a specialist financial planner for people with lots and lots of money who require extra-ordinary levels of management for their wealth.
Guided/non-regulated (you cannot receive compensation for mis-selling)
On line: If the advised route is not for you, there is a multitude of websites that can provide information and education on all things investment-related. Common sense would suggest that you start by looking at trusted, unbiased sources that are not trying to sell you anything.
For example: moneysavingsexpert.com, pensionsadvisoryservice.org.uk, moneyadviceservice.co.uk,
Once you know what you are looking for, the big investment and insurance companies with household names have a wealth of information on their websites and some offer live web chats.
Group workshops: You might be able to find a workshop that aims to talk you through the principles of investing. This would not be advice (even if you pay to attend the workshop) as the information given would not be specific to your circumstances.
Robo advice: This is a low-cost version of advice that is given digitally and remotely. By answering some questions online about your savings goals and how you feel about investment risk, a computer programme will suggest an investment portfolio for you.
Platforms: This is the name given to an online service where you can invest in and hold a number of financial products so that you can see them all in one place – a bit like an account with one or more pots. Robo advice (see above) will be delivered through a platform.
Financial advisers and planners also use platforms for their clients.
Stockbroker: Someone who buys and sells shares on the stock exchange on behalf of clients. This can be an online service (sometimes known as a discount broker), a telephone service or a service in a physical location. You would typically pay a commission for the service.
Talking Finances is a trading name of Talking Finances Ltd. Talking Finances Ltd is an appointed representative of Beaufort Financial Planning Limited, Kingsgate, 62 High Street, Redhill, Surrey, RH1 1SH, which is authorised and regulated by the Financial Conduct Authority, FCA Registration No. 583233