There are a huge number of people currently not working, having retired from full-time employment, who don’t have adequate pension pots to allow them to live in comfort. And there are also an awful lot of people who are still working but will be heading for the same future.
The age of retirement continues to rise, and while many will have had the potential to accrue a decent pension pot, they won’t have done so. A big reason for this is that their lack of trust in financial institutions, underscored by a general lack of awareness of how investments and wealth management works.
Most pensions aren’t worth as much as they could have been thanks to the financial turmoil the economy has suffered over the last ten years. While the financial crash obviously caused a lot of people to lose faith in the institutions that they had typically trusted to look after their money, this lack of trust has also led to people missing out on opportunities to grow their nest eggs through investments and sensible money management.
But bigger than the issue of trust is the problem of education – or rather, the lack of it – when it comes to the world of finance. Many people simply don’t understand much of the language that is used in this sector. Just the word ‘wealth’ brings unhelpful connotations. It’s perceived to relate to being ‘rich’, but this isn’t the case. However, many people will think that wealth management is not for them, because they don’t see themselves as being ‘wealthy’. And there is an awful lot more of this unhelpful, opaque terminology being used, compounding the problem.
The nomenclature that has grown around the world of banking, savings, investment and wealth management has become a barrier. On one side sit the elites, with their language of Target Date Funds and Gross Redemption Yields and Floating Rate Notes. On the other side is everyone else, struggling to comprehend exactly what the one per cent are talking about. There are many people here who could potentially make their money work harder for them if they knew how, but they are not getting the help they need.
If asset managers want to increase their AUM (assets under management), this has to change. Everyone in the finserv industry has a duty to help everyone understand how they can make the most of their money.
Wealth management needs to be completely demystified and this begins with education. Not just giving better information to Independent Financial Advisors so they can better serve their customers, but the general public at large. Many normal people have never spoken with an IFA in their life, simply because they don’t understand that it would benefit them.
Of course, taking the message direct to the person on the street requires a new approach, where the language used is much more plain and easy to understand. However, the image problem that the financial services industry is still suffering from needs to be addressed in a much more comprehensive way.
One aspect of this problem is that many wealth management institutions seem to exist in a different age. Most of their processes are very much analogue, and their websites – if they have them at all – are basic to say the least. A more up-to-date digital presence would be greatly helpful, and better ways of keeping customers informed about what is being done with their money and how it is improving their finances is sure to improve transparency.
This needs to be coupled with a real attempt to make the industry more consumer-friendly. I’m not just talking about investment companies making sure that their logos are seen at sporting events, but really developing a human face for their brands. These potential new customers have to see the wealth managers as relatable, offering services and products that are relevant to them.
A whole new approach is needed if consumers are to fully trust financial institutions again, and once this trust is fully rebuilt then the wealth management industry can truly help more people to have a better life. They will also be able to build their own businesses to be stronger, more inclusive and more transparent than they have been before.