A bit of fiscal responsibility

RetireSometimes one comes across an image which says it all.  This one popped up on Facebook somewhat randomly - I have not noticed the topic of pension-provision as a key focus for a majority of my own Facebook Friends.

It seems at times as if the UK population's relationship with pensions is somewhat dysfunctional.  If our employer is prepared to fund unsustainably expensive schemes at penal contribution levels on our behalf, then we'll kind of go along with it, especially when the taxpayer picks up the tab.  If they dare change the terms to reflect known financial reality, then we're out on strike, waving our banners and muttering apocalyptically about the end of civilisation as we know it.

We will repose an unrealistic degree of faith in the capacity and good intention of the State to bail us out in our years of decline, never apparently reflecting upon the Government's inability to manage its own finances responsibly, let alone ours.  Have none of us ever listened to the reports coming out of the House of Commons Public Accounts committee?  The latest scathing verdict about the bungled roll-out of rural broadband services makes salutary reading:  if the State cannot cost-effectively administer a fibre-optic cable, you really shouldn't be depending on it for your standard of living in retirement.  But people place their faith in the oddest of places, usually with little basis in reality.

It's a funny thing, really.  It is not as if the concept of 'retirement' is such an unattractive one that people cannot bring themselves to think about it.  Judging by the sheer degree to which folks gripe about their jobs, you'd think that they'd pull out all the stops to ensure that they could retire as early as possible - instead, they'll defer making effective financial provision as long as they can, and only then after they've exhausted the possibilities of the usual suspects promising Retirement Nirvana.  No, you can't depend upon a hypothetical legacy from Great Aunt Maud, primarily because her estate will be gleefully absorbed by care home costs.  No, you can't expect your kids to support you in the style to which you'd like to become accustomed, as they'll be battling with accumulated Student Loans until they are old and grey.  And No, your business is not your pension, especially if that business is all about you.

Having provided financial-planning advice for thirty years, twenty-three as an IFA, I don't see an easy answer to this kind of challenge.  The same attitudes of unreality persist.  The same excuses for inaction get trotted out.  It seems as if human nature (at least in its British incarnation) is as resistant as ever to the idea of systematic, targeted provision.  When one meets a client who 'gets it', the encounter tends to get one somewhat misty-eyed, such is its rarity.  And, yes, I appreciate that I am painting a somewhat one-sided picture here - there will be those IFAs who attract to themselves a certain class of clients, for whom those dysfunctionalities are less evident.

There are some component parts of the overall answer:
  • A sound grasp of the facts certainly helps to disabuse customers of false notions of their financial security
  • An ability to paint pictures - perhaps repeatedly, over time, via the media of blogs and newsletters
  • A decent Annual Review Service which incorporates, as a default, a way of mapping the future
  • A consistent message from the adviser which is far less about products than it is about planning
Kevin Moss, 26/09/2013