Today Barclays announced plans to stop offering financial advice through its retail branches. The bank cited that Barclays Financial Planning was no longer commercially viable.
Barclays said it expected to shift towards an online execution only investment service, and that financial advice in bank branches would likely decline. 'Execution only' is whereby an institution carries out a financial transaction following explicit instructions from a client, without providing any advice. Should the proposal go ahead around 1,000 Barclay's staff will be affected.
Last week Barclays was handed a £7.7 million fine by the Financial Services Authority (FSA) for the mis-selling of two AVIVA investment funds.
The wider implications for the rest of us
Some quarters appear to be rejoicing in the fall of Barclays Financial Planning claiming that, as is often the case with banks, the company's emphasis was more on selling products than giving suitable financial advice. Now while I personally stand against tied agents and the practice of financial advisers being rewarded by the products they recommend (as it's easily open to abuse) Barclay's decision could be a start of a worrying trend.
Financial advice is already the preserve of the wealthier minority. But if other institutions follow Barclays' example then the channels through which the majority of people have access to some form of financial advice will be greatly diminished. And with most people unable to afford to pay a fee for financial advice (as they will shortly have to under new rules) they will be left to fend for themselves. It could be argued that this might lead to even more people purchasing inappropriate investment products in the future.
Independent Financial Advisers won't be able to help
Independent Financial Advisers (IFAs) won't be able to pick up the slack and provide services for the swathes of former bank clients as a) they won't have the capacity to and b) they won't want to. While an IFAs advice may be impartial and have your best interests at heart (at least I hope it does) they are businesses after all which means that they are driven by profit, whether they admit to it or not. If an IFA wants to be more profitable then they can either increase the amount they charge existing clients, take on more clients or replace their existing clients with richer ones (or a combination of the three). And I fear the 'richer client option' will be the easier choice. In the current economic climate can you really expect an IFA to increase capacity and therefore overheads when instead they can simply cherry pick those clients leaving the banks? So where does that leave the masses?
Why Money to the Masses' work will become even more vital
This site and maybe others like it will increasingly become the sole source of financial expertise for the majority of people. The key difference between this site and the rest is that I am qualified in financial planning and work within the industry. I am not a self publicist or a journalist. I have no agenda nor motive other than trying to help everyone to take control of their finances whether it be mortgages, insurance, investments, household bills......the list is endless. Why am I doing this? Simple, because no one else is.
The site if full of insight answers to all those questions you wish you knew the answer to. If you follow me (which you can do via the website, twitter, facebook, linkedin or my newsletter) I will help you take control of your finances and help you become wealthier and happier. If nothing else I will help you realise that personal finance is not this scary world and you can conquer it with little effort and time.
But you can also make a difference by spreading the word of what I am doing. So please mention this site to everyone you know. And remember, if you have a finance related question, simply ask me via the question box to the right and I’ll answer it.