The ‘educated guess’, Kryptonite and the democratisation of financial planning

The “educated guess”…

It’s something we all do every day (probably every hour of every day) and we do it so often it’s part of our underlying subconscious decision making process.

It’s something we all use in the short term (“Shall I leave early to avoid the traffic or not?”), and in the longer term decisions (“What changes do I need to make in my business to ensure it’s minimising risk and maximising opportunity?”).


It’s sometimes works out (“I reckon West Ham will stay in the Premiership but won’t win the league”) and as and if not more often sometimes it won’t (“I reckon this is the year England will lift the world cup again!”).

In fact, two of my favourite books, “Thinking fast and slow” and “The Chimp Paradox” talks in depth about how we make decisions and, however sure we are, the majority of the decisions we make are of the ‘best guess’ variety.

In our profession we’re encouraged to make ‘best guesses’…many I actively try to avoid!

Trying to Accurately “Guess” what the next budget change will be, what particular market’s are going to do, or what fund manager will outperform another is to me, a fools errand best avoided (although some of us in the world of financial planning or advice do feel we can add value by providing an insight into there areas).

However there’s questions I don’t mind having a stab at. This one fascinates me at the moment…

“What will mass market financial advice/planning look like in 5 – 7 years time?”

As some of you may know I’ve got an interest in the auto enrolment compliance market (before you stop reading, and being acutely aware of the ‘kyptonite’ nature of talking about AE on adviser lounge, this article isn’t about Auto Enrolment).

In the corporate market we’re currently seeing a fundemental shift.

A move where larger employers (who usually by their nature have more complex needs as a business) are happy to engage with a fee based consultancy solution to smaller employers who are looking for a solution which is a commodity based solution.

A solution which still involves guidance and support but allows smaller employers to have all the tools to make simplified decisions so that they are able to comply with the regulation.

A move (and a solution) I’ve recently written about in a recent White Paper (which you can download here)

That’s not to say there is still room in the corporate space for a fee based consultation option for smaller firms. However smaller budgets and more simplified solutions mean that sometimes these more bespoke face to face offerings aren’t required and a easier, low cost and more systematised route will do the job for the majority of small SME’s and micro businesses.

This principle also, rather neatly, applies to the personal advice market…

The individuals with larger pots of money and (often but not always) more complicated financial arrangements are happy to pay for face to face ‘tailor made’ advice.

For most of us who frequent this site it’s where most of our fees come from…

However this leaves a massive gap.

The gap with Millions of us in.

The ones who need help, support and guidance to build pots to achieve financial goals.

The millions of us who need a framework to achieve our financial goals, the gentle reminders on why doing this is so important and a low touch hands on support if required.

The millions of us in the UK who would love our own version of Learnvest or a Financial Weight Watchers.

I know there are some in the advisory community who still think the ‘mass market’ individual advice can be serviced with a consultancy solution.

That might be true.

However the reality is that in a market where you’re swapping money for time (the reality of most consultancy models) you want to ensure that you’re paid as much for your time as possible. Something which is tough when dealing with less wealthy clients.

There’s also an element of the advisory community who think technology as a threat to high end consultancy. This is also a fallacy.

There will always be a demand for face to face bespoke financial planning. However in most of our businesses we’re understanding the commercial realities of ensuring we have clients who can truly afford it.

So, what do we do to help the millions of us who need help with their money but aren’t at the stage where they can afford a consultancy solution?

For me, the answer is simple…

Democratise financial planning by turning into a commodity.

Have a technology driven, simplified solution which gives people the framework to develop great financial habits?

Keep the cost at a level which allows the platform to make a profit, ensure the millions of us who might use it value the service, and help provide the next few generations a better chance of financial security.

That’s what I’d love to see develop in the market as a solution to help the millions of us who need financial guidance and support.


I reckon that something like that will come to fruition, in one form or another, in the UK very very soon.

However that’s just an ‘educated guess’…

What do you think?


15 thoughts on “The ‘educated guess’, Kryptonite and the democratisation of financial planning

  • Good prompt for discussion Chris. The advisory world is divided into those who dismiss the mass market as they believe it will never be profitable, and those like you and I who have a passion for these disenfranchised folk and want to serve them.

    Actually, I imagine there are many shades of grey between those two poles!

    The longer I do this job, the more I understand that for 99.5% of people, financial planning is a walk in the park. IT really is not rocket science:

    1. Spend less than you earn
    2. Invest the surplus wisely using all available tax incentives
    3. Insure against things you can’t control

    These three steps can indeed be commoditised and it isn’t hard to imagine that some kind of simplified solution could serve the needs of the mass market very easily.

    Using robust risk analysis tools designed to cross-check answers and root out inconsistencies, and having intelligent, real-world needs analysis tools is surely not beyond the reach of some smart app developer.

    Such a solution could be white-labelled by advisers and plugged into their website, providing a largely passive revenue stream.

    The technology can easily enable this, but the sticking point will always be getting people to take action. One on one, we are able to inspire and nudge people to make the decisions which are in their best interests. On a mass-market basis this is more difficult and will require an online platform, not like Transact or Nucleus, but a blog/podcast/vlog to which people can subscribe and be inspired to take action.

    My podcast listeners email and comment all the time saying they are taking action as a result of listening to the show, so now I’m just missing the technology to be able to capture those actions on my site!

    Final thought: there is no need for any adviser to fear the rise of simplified advice/guidance or the internet generally. There will, I believe, always be a place for face to face advice delivered by professional financial planners.

    • I think there is not only huge scope to help people with this idea Pete….there is also scope for commercial opportunity.

      The reason many financial planners don’t see it as an “affordable” proposition is that many subscribe to the idea that each piece of advice needs to be truly bespoke, where as you mention, in reality, a lot of what all of us actually need to do is pretty straightforward and can be automated and systemised…

      The Key is getting this concept to catch on!

      However I agree that the people with online platforms have a great opportunity for distribution but I also agree that advisers could use a simplified proposition to enhance (and not compete with) their services….and potentially providing them with not only a relatively passive income stream but also the clients they need for the future of their business!

      As always, thanks for your great comment!

  • Good article and excellent points made there Pete.

    Financial planning really is very simple for the vast majority, like you say. However getting people to take action is not that easy. I think using technology does help greatly.

    I’m in my mid-30’s and my peers want to save & invest – they just want to be able to do it on their iPad in half an hour while sat on their sofa after work. And why shouldn’t they?

    And don’t be fooled into thinking this is just what 30-somethings want. Our firm deals with entrepreneurs of all ages who run successful small businesses. The way they want to consume financial planning (& accountancy even more so) has changed forever.

    This is not about providing a service that is “less good” or “lower value” (although one can afford to charge less). It is actually about delivering financial advice / planning / guidance – whatever you want to call it – in a way that people actually want to consume.

    I think that is sometimes where advisers get a bit confused. Why does face-to-face advice have to be “superior”? It definitely needs to be more expensive but are the outcomes better? I’m not so sure they are. Especially for the 99% that Pete refers to above.

    Everyone trots out the travel agent example but who wants to go and sit in a branch of Thomas Cook anymore? Would you have a better holiday if you did? I doubt it very much.

    • Hi Simon,

      The Thomas Cook analog is a good one….and actually the Accountancy profession have been far better in providing consumers with commodotised “software as a solution” options (I’m thinking Kashflow, Sage and IRIS).

      I think you ask an interesting question….does face to face advice need to be superior? and, to be frank, for many of us at this stage of our lives, especially for those of us in our mid 30’s (does 36 count as mid or late?!) it may not be!

      However has our circumstances and issues as individuals and business owners become more complex I think face to face fills a gap.

      As mentioned on the discussion on Twitter about this subject there are solutions coming into play and it will be interesting to see how they develop….however my concern is that these solutions seem focused on where and how the money is in invested as opposed to what it’s designed to do for me both now and in the future!

      Thanks for your comment Si and adding a lot to the debate.

  • I know that a 747 can land (and regularly does) without any human intervention in fog as thick as pea soup, and if we actually knew our flight was being handled this way, we’d probably panic (a bit). A lot of variable stuff happens when close to the ground, of course.

    Are humans as fickle as the wind?

    I’d probably say more so, but reckon most of the repeatable process driven work can be replicated in a uniform way using IT. I do now. I’d just rather, myself, have a pilot in front as I’m munching on corn chips whilst watching re-runs of Father Ted. Even though they might only be adjusting some dials, I know they’re making sure the right info has been put into the computer and keep in regular contact with me over the tannoy.

    Good luck to anyone who wants to seam these things together. Too many clients of different shapes and sizes out there to worry about a bit more change. Actually, it might make your business better and more profitable and most importantly, be accessible to people who really do need advice.

    • Hi Dan,

      Thanks for your perspective.

      I agree that we might want a pilot on our flight and spend our time doing something else whilst someone helps get to our destination.

      However how about if I want to take my car and drive myself? A GPS might help me get to my destination but it’s up to me to decide what is the most affordable and sustainable option.

      Obviously the analogy falls down when you add the relatively low cost of many flights when compared to the relatively high costs of most face to face financial planning as well as the fact the a car and a sat nav might get you to mainland Europe.but might struggle getting to OZ! 😉

      However the point remains…

      Not everyone wants access to the skills and knowledge we have in the same way….and if we can work to automate and commodotise these skills and knowledge we can potentially make this profitable and have wide ranging impact.

      What do you think?

  • This seems awfully like the debates which used to rage about waiting for a true wrap to come along before making a decision about changing a business model.
    The public do not trust our industry and have no faith in the traditional product based savings process which is seen to be opaque and often promising long and delivering short.
    The public want a transparent,low cost process which they can understand without an actuary and which they can see is working primarily for them.
    We have the ability to deliver a low cost transparent solution now.
    Using an online wrap such as Transact- not an advert – all manner of savings can be organised in a way which clearly represent value to the client.
    Our experience shows that once on board with something they can understand referrals come thick and fast quickly bringing the scale needed for a low charging proposition to become profitable.
    Patronising people because of our presumed self worth will simply leave the door open for democratic business models from the likes of Amazon to commoditise and ultimately dominate the savings process and if you look at other aspects of our industry -general vehicle for example which have already gone down this route you can see that it swallows up all socio economic groups.
    Assuming you will be the last man standing will probably be very disappointing.

    • Hi Phil,

      I’m with you on a lot of this.

      I agree that trust is a massive issue and a transparent low cost process is key to moving forward.

      It’s true that we’ve got the technology (we’ve had it for years) to build such a solution. The questions is then what’s holding us back….the will and desire to make a change? a doubt that it’s commercially viable? I’m not sure….what do you think?

      I’m also with you on the fact that scale can be profitable is systemised correctly (and I’d be interested in what experience you’ve had of this) and if we don’t do it someone who is great at commodity models will…although I’m not convinced this will mean the end of consultancy.

      One things for sure….the future of financial planning is going to be an interesting place!

      Thanks for your insight.

  • I’d like to put a different point of view.
    Once you have some money saved in one or two existing arrangements, it becomes too complicated for people to deal with successfully on their own. That is why so many people approach people like us, asking for someone to explain how much money they might expect to have in retirement. The ridiculous number of different types of scheme have put retirement planning beyond the capability of anybody but an expert.
    Even if you havent got any money saved, it’s still too complicated, though. Just imagine that you are a nurse and your membership of the NHS pension scheme is the only arrangement you have. Do you know how much you might receive in retirement or when? No. Can you find out? No – unless you are lucky enough not to be affected by the Hutton reforms but that won’t help that much. The NHS pension is the biggest scheme in the land.
    Added to that, there are just too many choices of what to do with your money.
    Pete says you should “invest wisely using all available tax incentives”. So, you should put some money into pensions – that seems sensible. So, how much can you put in before you get a tax penalty? Oh, seems like you need an expert…
    Why is it so difficult – because for years, politicians have favoured choice over simplicity. Nobody is even talking about removing choice to make it easier to plan. They keep adding choices all the time.
    If people are to engage with their finances, they need choice removed.
    Anybody for a pension, without a tax free lump sum, offering drawdown only (no tax free cash) from state retirement age only, to replace all existing pensions? That would simplify things and make planning more manageable.

    • Hi Phil,

      On the point you make about Choice over simplicity….I agree!

      There’s plenty of research talking about the fact that too much choice is debilitating (my personal favourite is the Columbia university ice cream experiment)…

      …I also agree that there are a few who have complex issues which need support (which is why I talked about there always being a consultancy market).

      However for most people the choices are simpler than you think.

      The NHS might be the largest pension scheme (as well as being one of the largest employers) in the land and come with it’s own complexities however it still only employs less than 5% of the population.

      Assuming that all of the NHS staff have a requirement for face to face advice (and odds are they won’t) and there are an additional 5% of individuals who have levels of provision where face to face is required…this still leaves 90% of individuals who could do with a commodity based advice option.

      Although I agree that legislation might define the ultimate choices I also believe that a smart system might define and filter those choices into options we all can understand.

      Thanks for taking the time to comment.

      • HI Chris
        I think that would be fine if the NHS scheme were the only complex scheme with these issues. But most statutory schemes are like this now.
        And so too is the state pension. Who knows what you will get from the state pension or when? You can get a projection, but it wont take account of the effect of the flat rate (ha ha) scheme which is being introduced in less than 2 years, because the politicians havent decided how it will work yet.
        So retirement planning is easy, as long as you can ignore the state pension (somewhere between £5,000 and £10,000 per year) and any statutory/complex final salary type scheme. So that rules out most of the lower paid.
        Until you introduce simplicity into these schemes, mass market retirement planning without the intervention of a real person wont be possible, I reckon.
        Anyone for joined up government?

        • Hi Phil,

          You’re right.

          The NHS scheme isn’t the only complicated pension arrangement in the land!

          However there must be a more efficient way of supporting more of their population by using our skills, knowledge and expertise not on a individual by individual basis but by building tools designed to educate and empower the individuals to do this themselves at no threat to any existing consultancy business.

          I agree that there are plenty of complex arrangements out there but that doesn’t change the fact that most people aren’t engaged with a financial planner and would rather be empowered to solve this problem themselves, but with a commodity based support solution.

          Thanks again for your comment.

  • Hi Chris,

    We have used a wrap model charged at 1% for more than ten years to service group pensions which were previously held with traditional provider products. The results have been astonishing in both economic terms and in client engagement and retention.

    It was a long haul to achieve profitable scale which I guess is why more advisers have not used these propositions.

    Of course there is an element of cross subsidy in this kind of arrangement and even a lot of stuff for which you cannot find a way to be paid.However the overwhelming success achieved by serving these clients in a way that they understand and find of value should be the foundation stone of any modern advisory business.

    • Hi Phil,

      It looks like taking the longer term view paid off and you’re right, there will always be an element of cross subsidy with this model.

      Scale is key in the commodity market and it sounds like you’ve got there on the group pensions element.

      However I’m interested in whether you’re changing the model when the AE cap comes in next year? or who pays the charge (I’m assuming if it’s a wrap model it’s the employee) and whether this model could potentially be put under pressure, due to the current talk in political circles about employers and employees not paying for automatic enrolment, in future years?

      There’s plenty of ways to deal with this issue, I’m just interested in what your approach will be when these challenges approach.

      Thanks again for your insight Phil, it’s really useful.

  • I think the phrase is if it ain’t broke don’t fix it .

    Our process has worked very well for employer and employee and has changed the perception of employee benefits for all concerned.

    If ther is ever a real legal requirement to change the we will but until then plus ca change as they say.

    If you never forget that it is the employee whose pension is being managed you will not go far wrong no matter who is making the contributions.


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