Coronavirus offers opportunity to innovate

Sometimes it takes something awful to happen, something globally shocking, something unprecedented to inspire invention.

The second world war produced the Spitfire, as well as a host of other technological innovations.

I suspect the coronavirus crisis will leave a fundamental imprint on financial services

The coronavirus crisis has already produced something radical in terms of British politics; I would not be surprised if it changed society fundamentally, and I hope it produces innovation scientifically.

But I also suspect it will leave a fundamental imprint on financial services.

I suspect it will be red tape that is thrown onto a giant bonfire of pointless rules and regulations.

This has been a fast-moving story, the financial landscape shifting as quickly as the virus spread.

Possibly one of the over-riding feelings we will get when all this comes to an end is how foolish our reliance on debt has been.

As financial advisers you all know that.

We journalists know that too, but that has not stopped British society piling up debt in the form of credit cards, loans, hire purchase deals and zero-per cent balance transfers.

We are addicted to it, and it is at the heart of our consumer society. But one missed payment and the house of cards tumbles.

We have also taken savings for granted. We talked a good game about needing a nest egg for a rainy day, but I suspect most thought the sun would always be shining.

A bit like with the stock market, which some thought would go on rising forever.

For a decade, passive investing, where you have total exposure to the market, seemed easy. Any fool could make money. 

But now with a series of market crashes we see the value of asset allocation. 

Then there is our attitude towards pensions.

Not a single person I know who is a champion of financial wellbeing advocates pension holidays (for companies and individuals), or unlocking money in a pension early.

But such restrictiveness at a time when the companies are on the brink, and savers need some of the cash they have set aside, seems foolhardy.

Why should investors, in an absolute crisis, not be able to access their pension savings?

I never thought I would say that. But surely it is better than ramping up a lifetime of debt.

Then there are the rules around the money purchase annual allowance, drawn up in financially healthier times to stop abuse of the pension system.

Now though, they look onerous, particularly on savers who may now need to top up their lifetime savings that were ravaged by stock market falls.

This is an opportunity to reset the dial. The coronavirus may shake our society to the core, it should shake up financial services too.

Lifestyle wins

After years of discussion, the spotlight has finally turned on the risks taken by savers who used the pension freedoms.

I remain a supporter of these rules, but in hindsight the message from the Financial Conduct Authority that savers needed to take more risk seems foolhardy.

Its review of the freedoms found too many were sitting in cash, seeing their savings eroded by inflation.

But all that has happened since then is that more moved into equities. And you can guess the outcome.

Understanding risk is enormously difficult for ordinary people.

We all underestimate how much we need to save and for how long we are going to need our savings to last.

That is why, generally, this time of more complicated financial planning needs to be left to the professionals.

What has worked though, in general, is lifestyling.

Auto-enrolled scheme, Nest, reported while younger savers had seen their pots fall 17 per cent, older ones had dropped by 0.6 per cent. 

Let’s hope other schemes have achieved similar results. A financial principle that works.

Rose-tinted glasses

There are few more one-eyed sectors of the economy than estate agents.

I remember working on local papers when house prices fell heavily, and the commercial department begged us not to mention it because property advertisers only wanted to paint a rosy picture of the market.

Now they are at it again.

Estate agents talking about how people are sitting at home looking at Rightmove, ready to snap up a bargain.

That may be. But who in their right mind moves when the economy is falling apart?

James Coney is money editor of The Times and The Sunday Times