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Welcome to my eighth bi-monthly commentary which I am writing to provide a perspective on what I am doing on a daily basis in my working life and drawing attention to anything which has happened to me since writing the last blog.
Now this month I want to talk about money. Not the money we advise on, not the money we like to make for you, but the fees we charge for our services.
Since the Retail Distribution Review abolished commission payments on everything apart from life insurance, the Fee charging world has been with us, and this means that all of our fees are clear, agreed beforehand and based upon the time we spend with clients.
The abolishment of commission has been nothing but a positive in my eyes as it was all too easy for some advisers to hide the amounts they were receiving, and all too easy for insurance companies to offer inducements to the greedy. Both of these actions were in desperate need of being outlawed and it was about time we became a profession rather than an industry.
One unfortunate repercussion of this however was that advice was regarded as 'no longer free'. Of course there was always a cost, but due to the clever use of smoke and mirrors, not to mention allocation rates and early surrender penalties, it was harder to see what that actual cost was.
Now it was crystal clear, suddenly it appeared to some people that advice was out of their reach and "only for the rich". This was counterproductive. The less financially aware and those with very little in the way of savings, pension or income, are often those who need advice more and inevitably are those who are (or maybe were) easy prey for the commission hungry salesperson. Is this fair? No it is not. Advice should be accessible for everybody and by excluding some people from the professional advice process wasn't the aim when commission was abolished.
So, we had a dilemma. And we still have to a certain extent but thankfully it looks as if this is about to change.
The Government will now consult over the introduction of a "pensions advice allowance" which will allow people over the age of 55 to withdraw up to £500 tax free from defined contribution pensions to redeem against the cost of financial advice. This may be available not only at retirement but up to ten years prior to this to ensure the journey towards retirement is planned correctly.
This may not sound like much of a newsworthy story but it is. If introduced, it allows people to access advice who may have been priced out of it previously. It allows the uninformed to be professionally informed and avoid the potential for wrong choices to be made. Let's hope it is introduced in the near future.
Ian Howell DipFA MIFS