Financial advice is for rich people.

PoorDave

claretmatt wrote:

I think that intertia, laziness and time factors are big reasons why people can't, don't or won't sort their finances out.

If you ask some 20 something year olds about saving for retirement or pensions then the general attitude is that

1. They'll deal with it later
2. They don't understand them
3. They might get run over by a bus tomorrow

Its not a sexy subject and the "pension / retirement crisis" is surely an indication of this.

You could apply the same criteria to fixing your car or decorating your house for example. Its easier to get someone else to do it than learn or you just seem to put it off and put it off.

I do agree that personal finance should be on the school curriculam

So should spelling!

But seriously, i agree with your post completely

EdInvestor

I suspect a lot of the angst around is because the system is in a major state of flux.It used to be fairly simple - you aimed by the time you retired to have a home with mortgage paid off, a good company pension or personal pension plus a state pension and a pot of cash/Peps and ISAa for extras.

Then it all started to go a bit pear shaped. Endowments started to fail and so did personal pensions.Annuities rates collapsed. Company pensions starte shutting down with large deficits an the Givt was forced to set up a protection fund. But house prices rocketed, making up the overall difference for many - and a new product called equity release was invented which meant you could get money out without leaving home.

Then kids started having problems, as uni fees meant they got into debt and high house prices meant they needed help with a deposit.Fortunately BTL emerged as a new thing and parents could raise the basic money to help the student stand on his feet at quite an early age - and perhaps toip up the failing pension as well.

Then the Govt got in the act and changed all the private pension rules, and loads of new companies got onto the internet and offered cheapo deals. Sites like these sprang up to help directly.There were a few dramas like Equitable Life, and the pension windup victims that wouldn't go away and got political. Then the Govt decided to change all the state pension rules as well. Meanwhile the property market still didn't crash...

You can't really blame people for feeling that it's a bit difficult to get a handle on all this stuff...

Mrs_pbradley936

EdInvestor - that is very well put.

cheerfulcat

EdInvestor wrote:

I suspect a lot of the angst around is because the system is in a major state of flux.It used to be fairly simple - you aimed by the time you retired to have a home with mortgage paid off, a good company pension or personal pension plus a state pension and a pot of cash/Peps and ISAa for extras.

How far back are you going? Do you remember Robert Maxwell? " The system " has never been stable. This is rose-tinted glasses stuff.

Then it all started to go a bit pear shaped. Endowments started to fail and so did personal pensions.Annuities rates collapsed. Company pensions starte shutting down with large deficits an the Givt was forced to set up a protection fund.

Company pensions have been badly affected by Gordon Brown's raid. And pension funds generally haven't been helped by new regulations which effectively force them into bonds.

But house prices rocketed, making up the overall difference for many - and a new product called equity release was invented which meant you could get money out without leaving home.

Equity release is not a new product, it's been around for forty years.

Then the Govt got in the act and changed all the private pension rules, and loads of new companies got onto the internet and offered cheapo deals. Sites like these sprang up to help directly.There were a few dramas like Equitable Life, and the pension windup victims that wouldn't go away and got political. Then the Govt decided to change all the state pension rules as well. Meanwhile the property market still didn't crash...

Well, MSE and TMF pre-date the government's meddling and Equitable Life but I guess I agree with the sentiment...

You can't really blame people for feeling that it's a bit difficult to get a handle on all this stuff...

Sorry Ed. I know that you have not been investing for long but honestly, ten or fifteen years ago it was an entirely different picture. Nowadays there is so much information available; hundreds of websites, thousands of books, at least half-a-dozen magazines, personal finance pages in every newspaper, IFAs like dh and the sorely missed whiteflag ( and others who have been driven away by negative attitudes ) who give their time freely on forums; the ability to converse with other private investors...plus,as dh says, the quality of the products has improved out of all recognition. Think of the " old-style " personal pensions and their horrific exit penalties ( 50%, as I happen to know from sad experience ). And you think charges are bad now!

ReportInvestor

Two points re CC's last post
Equity release in its new form, offering protection rather than a road to suicide, is very different.

Maxwell was a glaring exception. Unfortunately the rules brought in to protect people against another Maxwell caused endless grief for many just short of retirement.

I agree with Ed that it used to be far more straightforward, and I'd add three more changes that can complicate matters for the average investor:

More career changes before retirement.
More relationship breakdown.
Having children at a wider variety of ages.

And student debt is going to balloon over the next three years.

cheerfulcat wrote:

nobody has to pay £250 an hour to see an IFA. Several IFAs have already told you that. There are cheaper advisors, and there is always the commission based option

Which? is reported in the Independent today as advising consumers not to go for the commission based option.

dunstonh

Go back as little as 15 years ago and banks couldnt offer savings accounts. Only deposit accounts. They couldnt offer mortgages on the same terms as building societies. Building societies couldnt offer current accounts. There were no decent regular contribution investment products (regular contribution PEPs were just coming in) and single premium investment products were very expensive.

Distribution channels were limited and it didnt matter where you bought because discounting wasnt very common. Indeed, direct products were often more expensive.

The average person didnt really have access to IFAs. At least not decent IFAs anyway (not including the estate agent IFAs who today would be mortgage brokers rather than IFAs as all they did was mortgage business - you dont go to electrician to fix a water leak). The average person had the direct salesforce giving them advice and look where that took us.

You also have computers and software, including the internet that allow IFAs and the individuals utilising them to do things and research information like never before.

Whilst things in the past were simpler. You have mortgage at B/S, current account at bank, savings account at b/s and endowment with life company, you can see that the choice and quality was limited. With flexibility and choice comes an increased number of things to think about. That can make it more confusing. However, not if you are willing to spend some time on it. If you arent you have advisers that will.

EdInvestor

CC

I'm trying to look at this from the point of view of the general public, not investors.

Far and away the most fundamental change is the switch from the high inflation/high interest rate environment to low inflation/low interest rates.

This has had several really sigificant effects:

#it has made borrowing appear cheaper and encouraged a major increase in demand for property which has put prices up massively.This helps people who own already, but harms young first time buyers, who are also the most prone to use easy credit and get into debt.It's probably the main reason for the anger of people like Tirian.

#it has cut the returns on people's savings - cash interest, stock and bond market returns, and most importantly pension and annuity rates.This harms people who have saved and exposes them to very low returns if they hold old fashioned products like endowments, which have high charges suited to the high inflation era. But the effect is not uniform. Other people at the same company but with a pension rather than endowment may be winners, because their products have guarantees which are now 'in the money".

There is also a big gap between people who have final salary pensions ( which require no effort and are guaranteed in almost all cases) and money purchase pensions which require investment skills which people are not taught. Many people are basically unaware of the difference and shocked when they discover how little their pension will be.

In this context it is difficult to give guidance. Many people are starting completely from scratch.Is it any wonder they are baffled at the apparent complexity - not to mention the differences of opinion among those who are informed?

Meanwhile "the system" takes advantage (as usual) by producing duff products like guaranteed equity bonds which may do what they say on the tin but leave you worse off because of disadvantages they don't mention.

And the Givrnment/regulators utterly refuse to do anything to help people who have seriously lost out when it is absolutly clear as a bell that they fell down on the job :mad:

Is it any wonder people think it's a minefield out there? Is it any wonder people are angry?

It may look better to you, and when one does understand how the system works, then the way to get it to work for you is definitely more clear than in yesteryear.But you have to understand the system first to know that.

Most people don't.And as a result, they're baffled, confused, frightened of trusting advice, but unable to figure out where to start to do it on their own.

A significant proprotion are outraged that they should be forced to do it own their own at all - there should be trusted professionals to do this..I have a lot of sympathy for the former group. But frankly I think the latter approach is a waste of time.

Might as well accept that althought there may be a trusted professional out there, he's likely to be very difficult to find and require a very high fee. Better to get on with figuring out your own route to a better life now. It's actually not really as complex as it looks and there are plenty of people willing to help on this board.

But I'm afraid some effort to understand the basics is required.

Mrs_pbradley936

If this can cause a few of you on this thread to have different opinions and you know what you're doing - imagine what it is like for the rest of us!

EdInvestor

The average person didnt really have access to IFAs. At least not decent IFAs anyway (not including the estate agent IFAs who today would be mortgage brokers rather than IFAs ). The average person had the direct salesforce giving them advice and look where that took us

I would argue ( as would the OP) that little has changed in this respect.

What has changed is the different economic and social environment and the explosion of baffling financial choice.



What most people actually now want is simplicity.

But unfortunately the desire for simplicity tends to lead to the very thing they don't need : the guaranteed equity bond, the "funds of funds", the balanced managed funds, the endowments and all the other rubbish which purports to be simple but is actually a complicated packaged product which hides within it - you've guessed it - the high charges that syphon off your wealth!

Keeping it simple is very important in DIY investing.But when applied to the financial services industry, it's almost always a recipe for trouble.

cheerfulcat

If this can cause a few of you on this thread to have different opinions and you know what you're doing - imagine what it is like for the rest of us!

pbradley, unfortunately this has been made to look more complicated than it really is. It's quite simple; most of us would be well advised to put aside money for later life, when we are no longer earning. It is possible to save in bank deposit accounts but the after tax return from these is only just a little bit higher than inflation ( sometimes not even that, for higher rate payers ). In order to get a better return, you need to take on more risk; this means stock-market related investment of some sort. You can invest in individual shares; the fewer companies you are invested in, the greater the risk ( which also means that a very concentrated portfolio of, say, four shares has a good chance of doing very well ). If you don't fancy holding individual shares you can put money into a collective investment ( a fund ). Some argue that most funds don't outperform the market ( they are " closet trackers " ) so that rather than faffing around trying to choose funds, it is enough just to make monthly purchases of an index tracker fund. There will always be arguments on both sides on this one . There are other investment "products" like guaranteed equity " bonds " but for the most part they are unneccessary and can be ignored ( in particular, ignore anything with a guarantee as the only guarantee is that it's a rubbish investment ).

Any of these investments can be placed inside a tax shelter, either an ISA or a pension. They can also be held without the " wrapper ". Be aware that pensions are highly inflexible.

The real secret of success is regular investing over a long time, starting as early as possible.

Now, what's complicated about that? Ignore the stuff about economics and politicians and debt and house prices because none of it matters in the long run. Just keep socking away the monthly contributions.

In this context it is difficult to give guidance. Many people are starting completely from scratch.Is it any wonder they are baffled at the apparent complexity - not to mention the differences of opinion among those who are informed?

Those who are informed weren't born that way! Speaking for myself, I am just an ordinary person. I have never worked in financial services. Everything I know I learned from reading and making my own mistakes. Thousands of people on the Motley Fool have done the same. Anyone can do it, if so inclined. People need to be encouraged to learn, not to be told how horribly complex it all is. Even if they only learn enough to decide that a cheap tracker will do them [ please please please no tracker arguments ].