The fact these forces have emerged at the same time is no accident, Romer-Lee continued, as the government has decided individuals must provide for their own futures and has deployed its regulators to ensure they are looked after properly while doing so.
Unfortunately, many investors have not faced up to the fact they have to take responsibility, prompting initiatives such as auto-enrolment from the authorities.
This means financial advice is as vital as ever in helping members of the public plan for their retirement, but problems arise from the fact these individuals are reluctant to pay for it and so will continue to make their own poor decisions – such as keeping their money in cash.
“The biggest single investment decision most people take is to keep their money in cash because it is safe. It is not safe at all it is bloody stupid,” Romer-Lee said.
“People want to preserve their capital, retire early and be comfortable in the later years of their lives. The financial services industry has not done this job well at all.”
The government can only afford to provide for pensioners to a subsistence level, so it has used the regulator to change the shape of the industry. It has made it so advisers have to act on behalf of the customer because they provide their remuneration, not the product providers.
In response the advisory community has had to change business models, which has been very hard to do.
“How does a shark become a cuddly bear? Advisers have to make sure they have ongoing relationships and loyal customers attracted by good service,” Romer-Lee said.
Another contributing factor is that the cost of regulation is going up while the amount of money advisers can make from their clients is going down.
“Hargreaves Lansdown is living proof you can make money out of lower margin clients. But nobody really knows what the distribution landscape is going to look like,” Romer-Lee concluded.
