Dislodging disengaged investors should be priority

The phenomenon I’m describing could be termed the great inertia. This inactivity takes many forms.

Money can languish in any number of dog funds, for example, consistently underperforming year in and year out.

Sums can end up stuck in a pension fund, or in several pension funds, invested with too little care and attention – and seemingly destined to remain divided up into a series of smaller pots for a while longer, given the relevant consultation on the subject has been kicked into the long grass.

Should we also be concerned about those potentially unloved mid-sized pots on advisers’ books?

They may be the ‘wooden spoon’ clients, who didn’t quite amount to what they may have promised, in asset terms at least.

We have a huge number of retirees joining the ranks of the invested-but-not-engaged masses. John Lappin

Maybe some promising young lawyer took off to join the circus, thereby spurning the chance to become an Isa millionaire. Yet he may still have tens of thousands invested.

Now we have a huge number of retirees joining the ranks of the invested-but-not-engaged masses.

Many will have only encountered investments through employers’ schemes of some kind, and some may be only vaguely aware that this had something to do with stockmarkets.

How, and where exactly, are they invested? It is fair to say they are now effectively stocks and shares investors being confronted with managing their capital and income needs.

With this in mind, perhaps we see why we need the Financial Advice Market Review.

But for some, if not all of the earlier examples, you have to wonder why the better pension firms and fund managers haven’t found ways to claim the management of this cash from their underperforming peers – in the interests of themselves and their clients.

This list includes the mighty marketing machine known as Hargreaves Lansdown, but such clients would also be better served with Schroders or Fidelity or indeed Standard Life or Aviva than, say, some sort of ‘muddle-through’ life company portfolio.

In very general terms, I would be least worried about the advised portions – even if they are not being very actively advised – because these pots have at least had a professional eye run over them.

Advisers are also more likely to have made an attempt to move that money onto somewhere it may receive more attention.

I accept that retirees’ pension money is probably the top priority at the moment. But it feels as if we need to find ways to shake up all this inertia, and at least present disengaged investors with a better solution – or at least a choice.

There is, of course, still great merit in any financial services business plan that retains assets.

The longer one keeps hold of pots of money, the more one tends to profit – although some planning businesses are definitely not predicated on this assumption.

Nonetheless, it should be a system that works: keeping everyone on their toes in terms of performance, service and maybe even the appropriateness of solutions. How do we reach this point?

4It is not clear that more competition alone is enough to really get us there. But it all feels rather unproductive to not even try to address the problem.

John Lappin writes on industry issues at www.themoneydebate.co.uk