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The Advice Gap

Written by Steve Dodge of the Independent Financial Advice Centre

If you “Google” “May you live in interesting times”, you will find it is a Chinese curse, which is very apt presently! Apparently stability, steadiness and the known were much preferred to constant change and the unknown, hence you “curse” someone with change.

Well 2015 was certainly an interesting year to say the least, with so many changes it may take quite some time before these become the “known” and some sense of stability returns.

One “change”, resulting from the Retail Distribution Review (RDR) a few years ago, was ordering all Financial Advisers to charge fees and abolish commission. This was simply to avoid product bias i.e. it was designed to stop unscrupulous advisers selling the highest commission product rather than the right one for the client which might have paid them less.

This was a good objective but it has produced well prophesied un-intended consequences and resulted in a new expression called “the advice gap”. As a result of forcing all advisers to charge fees, those with modest savings are finding advice very expensive in relation to the funds they have, and thus, quite understandably, are not seeking any advice.

However those with sufficient funds already are finding advice plentiful and relatively “cheap”, hence the “gap” between those who get advice and those who don’t.

Folk caught in “The Advice Gap”, and there are millions affected, thus have to make their own decisions, which in the light of so many changes in the last few years in taxation and pensions are difficult enough for us professionals who do this all the time let alone a layman.

As it is so easy for an individual to reach the wrong answer Parliament is conducting another review called the Financial Advice Market Review (FAMR) or to us: - Retail Distribution Review 2, (RDR2). This could mean a return to “advisers” being paid commission once again or something as yet unknown.

Yes an IFA is not “cheap” but are they good value? The best return on 10,000 invested for the last year was 14,400, the worst a loss of 4,800 leaving 5,200. No IFA can guarantee to give you the highest return but they should easily be able to avoid giving you the worst! How much would that advice be worth?

It costs nothing to find out how much “advice” for you would cost. IFA’s normally give you an estimate in advance once they know what you need, and you can then accept it or look elsewhere. (Bit like taking a car to a garage for an estimate for repairs.)
In the meantime, whilst we await the results of RDR2, to see if and how the “Advice Gap” can be closed, there is nothing more to say except these certainly are “interesting times”.

If you would like further details of what services an IFA can offer you please contact Georgina on 01277 630873

New Year, new beginnings

A new year provides an opportunity for people to reflect on what they have achieved in 2015 and consider what they would like the coming year to bring.

This fresh start offers new beginnings when we all make promises to lose weight, eat more healthily, get fit or save money.  However, the start of the year is also a time when relationships can be uppermost in people’s minds.

When things go right
Couples who are happy together will be thinking about the future.  For those marrying, a pre-nuptial agreement organises financial affairs and says how their finances should be treated should their marriage not endure.  Those moving in together may like to consider a cohabitation agreement in order to regularise financial arrangements.

Such documents are often perceived as unromantic and only for the wealthy, but they are wonderfully practical.  Although conversations around the want and creation of these documents can be difficult, once done, they can help a relationship flourish as they provide certainty on financial issues.  It is also worth remembering that despite the ever increasing number of couples who choose to live together rather than to marry, the law still fails to offer much in the way of protection to couples who are not married.

When things go wrong
Sadly, almost half of marriages in the UK end in divorce.  Some couples who are experiencing relationship breakdown and considering divorce or separation try to enjoy the festive period without too much upset and anguish, particularly where there are younger children in the family.  For others, it can be that spending an increased amount of time with their partner or spouse over Christmas and the New Year puts further strain on an already unhappy and troubled relationship.  In both of these scenarios, the early months of the year can be the impetus for people to make big changes in their lives and this is why lawyers see an increase in enquiries about divorce and separation at this time of year.

Here at Birkett Long we never push people into these life changing decisions.  We will be on your side and will do our utmost to get the best outcome for you should you decide that divorce is the right path to take, but until then, we’ll allow you space and time in which to take this very important step.

If you would like a confidential discussion about separation or divorce, or are considering whether a pre-nuptial or cohabitation agreement is right for you, contact Joanne Thomas at Birkett Long LLP on 01268 244157 or