James ConeyFeb 20 2019

Lloyds closes the advice gap in sales push

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Lloyds closes the advice gap in sales push
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With that move it looks as though we are going full circle with banks re-entering the advice market.

I cannot tell you how much I hate banks doing financial planning. They have always been so bad at it.

They approach it from totally the wrong angle: they are about how much they can sell, not what the customer really needs.

What worries me the most is that Lloyds seems to expect much of this growth to be organic, coming from its existing customer base.

Gulp. That means targeting current account customers.

If Lloyds were planning to offer a whole-of-market independent advice service, which catered for the mid-market, then I may be enthusiastic.

We do not know precise details of what Lloyds is planning yet, but I would be surprised if it was whole-of-market advice, which means it will be offering a very limited product range, which in turn effectively means the return of the tied adviser.

We have definitely been down that road before.

They will have to be enormously careful about sales incentives. Any type of bonus built in to the bank model quickly skews their sales of one product or another.

(Fortunately Lloyds has a very active and vocal in-house union, so we get to hear about any pressures the front line staff are placed under pretty quickly).

I would also be interested to know how exactly Lloyds is planning on tracking down these customers.

In the old days, counter staff would usher customers into a back room where a client manager would do the dirty work.

But branches are closing, and customers are venturing into them less and less, so this human interaction is going to be hard to strike.

On top of this there is also the cross-selling risk. It may not be just investments they try to flog you, but a whole load of pretty awful life products too.

I can understand why Lloyds has weighed in. The post-retail distribution review world is not nearly so daunting as it thought – not if you are a multi-billion pound multinational.

So getting rid of all those branch advice staff now looks hasty.

If Lloyds were planning to offer a whole-of-market independent advice service, which catered for the mid-market, then I may be enthusiastic.

We do, of course, still have a chronic advice gap in the UK.

There is a possibility that the birth of new technologies since RDR and artificial intelligence, done to scale, could make this possible on a low-cost basis.

But where is Lloyds going to get these 700 new advisers? Having to train up so many, so quickly, will surely reduce the quality of staff.

They will be more like sales consultants with a fancy title.

No, this is not about quality advice, this is about asset accumulation, and it worries me greatly.

Knowledge is power

I do not think many would quibble over the success of auto-enrolment.

That we have 10m people in pensions that would have probably not had one before, is undeniably a good thing.

There is the debate over contribution levels, thresholds, net pay schemes that deprive low-earners of tax relief, and the charges in some funds (ahem, Now Pensions).

But in general this has been a success.

What we now need to do is start having a proper conversation about investing. More than 90 per cent of the cash sitting in occupational pensions is in the default fund, and that just will not do at all.

Workers will not transfer this money into better funds themselves.

Pressure must be put on employers to find ways to have a conversation with their employees about pension saving. They are giving them all this money, let us help them do something with it.

Breaking the rules

What have I become? I am beating myself up as I have just broken the number one rule of being a money journalist. I have just accepted a renewal quote of my home insurance without shopping around.

Worse still, the price had gone up by about 25 per cent.

The reason I accepted was because I was burgled last year.

They did not take anything too bad – iPads, computers, some money from the kids’ piggy banks – but the crooks did kick the front door in.

My insurer Direct Line dealt with it all swiftly and without quibble. And for that they won my goodwill when the policy came up.

And plus, I forgot to look around until it was too late. Maybe next year, eh?

James Coney is money editor of the Sunday Times