Someone once said that banking is far too important to be left to bankers.
The comment was tongue-in-cheek, but it can be paraphrased to make a very good point that can apply to all of us: “major financial decisions are far too important to be left to non-experts.”
The most crucial financial decisions of our life, such as providing ourselves with a pension, or taking out a mortgage, are serious commitments with serious consequences, and should be carefully researched and thought through before taking action.
It is, therefore, quite alarming to read the recent report by the British Bankers’ Association (BBA) that shows we are increasingly turning away from personal, face to face financial advice. We are no longer sitting down with a qualified adviser, who can answer our questions and inform us correctly.
The BBA says customers making the major decisions I mention above are increasingly turning to apps and online web chats for advice on their finances.
The report, “An App-etite for Banking”, says that last year, 4.4 million web chats were hosted on UK banking apps or websites, up 24 per cent on 2015.
The number of people conducting some or all of their financial transactions online also rose to 19.6 million, up by nearly 10 per cent.
The BBA tells us that in total, activity on banking apps has soared by more than 350 per cent since 2012.
We’ve mentioned pensions, but it’s worth mentioning advice on insurances as well. The Association of British Insurers has been warning us for years of the potential dangers of shopping for insurance online. They say it is so easy to end up with an unsuitable insurance product when you buy without personal advice, perhaps from a faceless price comparison website.
Life insurance is complicated enough, but critical illness insurance is more complicated still, due to issues such as the number of illnesses and conditions covered, and the application process for a policy. If, for instance, you proceed without the correct advice you may, quite without any intention to do so, fail to provide all the information the insurer requires. This is known as ‘inadvertent non-disclosure’ and can complicate things if you need to make a claim.
This “app-etite” for organising of personal finances by app is taking its toll: 461 bank branches across Britain will close this year, as traditional banks restructure to offer more services online. Again, the likelihood of customers receiving the proper advice is reduced.
An expert at Ernst and Young commented on the BBA’s findings, saying that financially more savvy customers still prefer to “interact with other human beings when it comes to home-buying, retirement planning or a significant lending activity.”
All of this emphasises the crucial need to talk to a qualified financial adviser, rather than trying to navigate the complex world of financial planning on your own.
When organising your personal pension, or making sure you and your family are protected by the right insurances, there is no replacement for quality personal advice by an independent adviser. There’s no app for that!
Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 7188 6005. Further information go to “Kennedy Independent Financial Advice Ltd” on Facebook
