BLOG: Baby boomers have got it wrong about financial advisers
The “baby boomers” will for the next 20 years or so be reaching the end of their working lives and heading into retirement. Britain will have a larger proportion of its population at or in retirement than ever before. As this group of individuals reach retirement, crucial life changing decisions will need to be made.
There have been a lot of changes since the baby boomers were born, what can now be achieved by a smart watch in seconds, would have taken a week for a computer the size of a room to achieve. The world has moved on, but some things haven’t changed, the reluctance to take advice around retirement planning being one of them.
In 1948 the modern compulsory state pension arrived, introduced not to provide for a comfortable retirement but to avoid destitution. It remains, on its own, far from sufficient to even cover the basics of existence, so planning for retirement has been a need for decades.
The high yields of the early 1990s which saw record annuity rates are long gone and medical advancements see people living longer. With this period of retirement expected to be considerably longer than in the last century, the need for advice has never been greater.
One issue is that the misselling of the 1990s created a deep mistrust of the financial industry and once a stigma like this has developed it’s very difficult to shift.
There are three key myths that I think need to be busted to encourage people to seek advice:
- They are just trying to sell me something
This is a common misconception, that advisers will try to sell you a product for the purpose of it earning them a good commission, rather than it being the best option for you. They will in fact offer you advice that is suitable to your financial needs and requirements and your appetite to risk. Their goal is to make your money work for you, not for them.
- They will charge me a fortune
A financial adviser is providing a service and therefore there will be a charge for it. For an initial consultation the fee will be a set amount. It might even be free. The charging structure after this point, if you choose to continue with the advice process, will be fully explained to you as part of your consultation and in many instances it can be paid for from your pension funds, therefore not being a fee that you hand over cash for.
- They are just a common salesperson
Many believe that financial advisers are just salespeople who could have been selling double glazing last month and now advising people on their wealth this month. This is a common stereotype which is no longer true. Financial advisers now have to go through a full qualification process and to offer independent professional advice be of a Level 4 as a minimum with many being of a Level 6 (equivalent to a degree with honours)
The recent introduction of the £1,500 adviser allowance incentivises us all to seek advice from what has now become a highly qualified profession. Along with a pensions dashboard which should be working within the next few years, enabling the tracking of all pension arrangements, we should be in a better position to make good decisions for our retirement pots and continue to prosper into the golden years.
Martin Tilley is director of technical services at Dentons Pension Management