I initially thought I’d come up with some ‘plausible’ financial scenario but, after a quick look at my bank account, I fast realised I really did need some guidance.
I am also about to sign up to a company pension scheme, so I thought I’d ask whether it was wiser to put a greater chunk of my income into the scheme, or into an ISA. I am quite young, after all.
I dial the number…
I’m put on hold (for two minutes)…
Julia picks up. After giving her a few basic details (name, age, address), I explain the scenario.
Before we discuss my situation, Julia sets out exactly what she could and couldn’t do and mentioned the all-important financial adviser.
“We can give you general information about putting money into pension schemes and into ISAs to help you make your mind up, but I can’t advise you,” she said.
“That’s the job of a financial adviser.”
So far, so good.
We then wade through the various advantages and disadvantages of putting money into pensions and the value of shorter-term investments.
At this point, we’re essentially discussing the kind of thing that should be taught in schools and which I can’t imagine IFAs would want to spend valuable time explaining.
An example:
Julia: “It all depends on how disciplined you can be with yourself. Some people find with an ISA it is very easy to dip into it and it may be tempting to use it, but with a pension scheme you may not be able to access it until you’re 55. But it will help to provide you with a comfortable retirement.”
Julia then neatly explains the difference between cash and investment ISAs, the annual allowance, and directs me to a few more resources.
Crucially, she explains how a financial adviser could help me choose the right product, going on to explain the difference between ‘tied’ (soon to be ‘restricted’) and independent advice, as well as the difference between commission and fees.
I am pleased to hear Julia stress the importance of asking an adviser how they are remunerated.
Julia also explains how I can access an ISA through an execution-only service, details the drawbacks of doing this, and then directs me to some price comparison sites, which “could be a good start”.
We finish our conversation.
The truth is this: I felt better-informed after speaking with Julia than I did before. More importantly, at no point did Julia downplay the importance of independent advice.
Anyone seeing this service as a threat to IFAs needs to bear a couple of things in mind: firstly, it is clearly not targeted at the sort of people who would be the client of the typical advisory firm; secondly, it does plenty to tout the importance of professional advice.
I would urge anyone concerned about the service to ‘mystery shop’ it themselves. If you have time, you should also take a look at the website HERE.
You may be impressed by the information on there, and it probably provides the best explanation of structured products I’ve seen so far.
