18th October 2010

Alan Lakey - IFA viewpoint on the savings culture

What products or services would you like to see from providers to help encourage your clients to invest?

Product design has been focusing on large single premium business yet the savings gap confirms that it is the lower net worth sector that no longer saves and this is partly due to the lack of regular saving products.

Additionally, the marketing cost has been bled out of products - Stakeholder Pensions being the obvious example.

There is a need to go back twenty years and redesign regular savings schemes with transparent charging structures which reward the medium/long-term saver and also make it feasible for advisers to prospect for clients and market in a focuses manner.

What advice would you give to other IFAs about their role in stimulating a savings culture?

Advisers have been pushed towards the high net worth sector. This is partly because of the logistics of dealing with larger cheque books and also that the mortgage endowment meltdown has stopped providers, advisers and consumers from considering such schemes.

Advisers have a role but the savings/pensions gaps will never be reduced unless advisers are incentivised to seek out business.

What can/should the government be doing, despite the difficult economic situation, to encourage a savings culture?

Government has to acknowledge the reality that even in the cyber age the vast majority of consumers do nothing unless prompted. This applies to everything but mortgages where they are pushed towards lenders simply because they wish to buy a property.

Would you like to see lower minimum premiums from providers to help encourage your clients to invest?

Yes, £25 p.m. would be a reasonable low figure to encourage regular savings. I believe we need to move away from this low charges fascination which has pushed consumers away from investigating value and has pointed them at the lowest cost. If we took this view with cars we'd all be driving Daewoo's.

There needs to be a realisation that short-term saving can never be anything other than consolidation whereas long-term saving must involve a degree of risk in order to achieve growth.

Should National Savings carry introducer incentives?
It would enable them to compete in that sense but the reality is their products blow hot and cold depending on the level of borrowing that the government requires. Interesting thought that is unlikely to become reality.

By Alan Lakey, Highclere Financial Services

Adviser Letter of the Week