Elderly left struggling by financial advice swap

A switch from commission payments means many old folk feel cut off

Alarming signs are emerging of a growing gap in financial advice for elderly Britons, many of whom face acute debt problems. A new report from the University of Hull and Bournemouth University has outlined for the first time how changes to how financial advice is paid for has hit elderly people and their access to sound independent money advice.

At the start of the year the payment on commission to advisers selling investment products was banned. Instead financial advisers started levying flat fees, sometimes running into four figures for their advice services. In the first major study conducted since this change, researchers at Hull and Bournemouth universities have found that many elderly people, no doubt put off by high fees charged for financial advice, are floundering around and relying on family members and social services professionals for money guidance.

“The research we have commissioned shows that decreases in pensions and investment returns coupled with increases in the costs of living are having a marked impact on the well being of older people, many of whom are asset rich but cash poor,” said Michelle Crickett, director of research at the Institute of Chartered Accountants of Scotland, which sponsored the academic study.

“The fact that these older people are seeking financial advice from non-finance professionals, leaving their already stretched finances open to further risk, is highly concerning.”

The potential for elderly people in particular to suffer cases of mis-selling, fraud or poor financial advice from non-qualified people is a major worry, says Brian Dennehy, the managing director of Fund expert. “This report is very disturbing as it highlights a major gap in financial advice for a group that often needs help with their finances. As an independent adviser I normally see people who have a bit put away and are financially fairly switched on but there is a whole legion of people out there who need qualified advice and aren’t getting it.”

Mr Dennehy adds that some of the financial challenges facing the elderly are particularly acute: “As you get older often your finances get more complex. There are many people reaching retirement who still have debts or mortgages to pay off, or have a pension put to convert to an annuity or could be in danger of making a bad investment decision or one that causes their estate to be subject to more tax than is necessary. And dare I suggest as well that quite a number of elderly women relied on their husbands to take care of finances and when they die they can be left without any guidance and this is where they could be prey to poor advice, mis-selling or do nothing.”

Of course there is the government-sponsored Money Advice Service to help and many online resources, particularly helpful when it comes to buying an annuity, but Mr Dennehy says these can often be missed by older people. “Let’s face it, a good proportion of older people have no access to the internet or know where to source the right information online.  It is not enough to rely on online to cure all ills in this generation at least. We need face-to-face help for people from qualified professionals.”

However, citizens advice is reporting huge demand from the public for help with debt difficulties. These requests come increasingly from the elderly.

William Hunter, the founder of Hunter Wealth Management, said: “If you get inheritance tax planning and your annuity choice wrong, the financial consequences can be severe. It can cost you tens of thousands of pounds, maybe even hundreds of thousands of pounds. It’s just not worth the risk. Ninety per cent of people close to retirement have heard of the open market option – the right to take a pension fund and shop around for an annuity. Just one bad DIY decision made by an elderly person can amount to much more than the original fee for advice would ever have cost. And it’s so easy to be misled by headline income rates, or the spiel of an existing pension company offering you this, that or the other.”

For those with the means to pay, Mr Hunter says independent financial advice can be worth its weight in gold: “Getting financial advice will generally now require a clearly visible fixed cost. The irony is that this cost will generally be cheaper, and is certainly much more transparent, than the commission-based, potentially product-biased alternative of the past. But the psychological impact is much harder for people, especially elderly people, to take.”

With an ageing population the financial challenges are becoming more complex.  Danny Cox from independent financial advice firm Hargreaves Lansdown identifies long-term care provision as being of particular concern: “A huge number of us are going to need long-term care and this is an extremely complex area. Advisers have to know about state benefits and how to maximise entitlements. There is also the need to generate high levels of income to meet care costs but there are very few products which do this,” Mr Cox said.

With many elderly people being cash poor and asset rich the need for proper advice on equity release is also key. This is another area which Mr Cox reckons is poorly served: “Equity release is the another option to raise money. Equity release is also a specialist area of advice which few advisers do well and still bears the hangovers of the negative equity problems of 20 years ago,” he said.

As for closing the advice gap for the elderly, the report suggests that councils, the money advice services and the department of health join forces to open day clubs for elderly people where they can meet and have their financial problems addressed. Mr Dennehy thinks the financial advice industry can help. “Perhaps advisers could look at doing half a day a month pro-bono work for the elderly, helping give them pointers and the means by which to sort out their finances.”

Independent Partners: Search our directory to find Independent Financial Advisers (IFAs) who have been rated and reviewed by their clients. Find out more

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

The giant banner displayed by Legia Warsaw supporters last night
i100(and it's got nothing to do with the Great British Bake Off)
footballPremiership preview: All the talking points ahead of this weekend's matches
Angelina Jolie with her father Jon Voight
Arts and Entertainment
Tulisa as a judge on the X Factor in 2012
tvLouis Walsh confirms star's return
Life and Style
fashionClothes shop opens on Bill Clinton Boulevard in Pristina
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
Life and Style
Melissa and Joan Rivers together at an NBC event in May 2014
peopleDaughter Melissa thanks fans for 'outpouring of support'
Life and Style
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SAS Developer - DI Studio - Banking

    £450 - £500 per day: Orgtel: SAS Developer, Chester, Banking, DI Studio, £450-...

    Recruitment Consultants - Banking & Finance

    £20000 - £30000 per annum + OTE £40 - £50K first year: SThree: SThree Group an...

    Relationship Manager

    £500 - £600 per day + competitive: Orgtel: A leading banking client in London ...

    Relationship Manager

    £500 - £600 per day + competitive: Orgtel: Relationship Manager, London, Banki...

    Day In a Page

    Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

    The phoney war is over

    Russian troops and armour pour into Ukraine
    Potatoes could be off the menu as crop pests threaten UK

    Potatoes could be off the menu as crop pests threaten UK

    The world’s entire food system is under attack - and Britain is most at risk, according to a new study
    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
    From Mozart to Orson Welles: Creative geniuses who peaked too soon

    Creative geniuses who peaked too soon

    After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
    Caught in the crossfire of a cyber Cold War

    Caught in the crossfire of a cyber Cold War

    Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

    Salomé: A head for seduction

    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
    From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

    British Library celebrates all things Gothic

    Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
    The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

    Is the Hard Rock Café worth fighting for?

    The restaurant chain's owners are currently embroiled in a bitter legal dispute
    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

    In search of Caribbean soul food

    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
    11 best face powders

    11 best face powders

    Sweep away shiny skin with our pick of the best pressed and loose powder bases
    England vs Norway: Roy Hodgson's hands tied by exploding top flight

    Roy Hodgson's hands tied by exploding top flight

    Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
    Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

    Di Maria and Ronaldo: A tale of two Manchester United No 7s

    They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
    Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

    Robert Fisk: No victory for Israel despite weeks of devastation

    Palestinians have won: they are still in Gaza, and Hamas is still there
    Mary Beard writes character reference for Twitter troll who called her a 'slut'

    Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

    The Cambridge University classicist even wrote the student a character reference
    America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

    America’s new apartheid

    Prosperous white districts are choosing to break away from black cities and go it alone