Stretching the bank of Mum and Dad
Gemma Harle is managing director of Tenet Lime
If you ever wanted to know why holistic financial planning will always have a market you need look no further than the increasingly stretched bank of mum and dad.
A typical couple in their 40s with decent careers and modest pensions, in a good-size house with equity in it , might appear at first glance to be well set for later years but once you introduce things such as two or three sets of university fees, plus accommodation, living expenses and books – things become quickly less comfortable.
The total cost of a degree is now estimated at £60,000 per student, and few parents would want to encumber their offspring with that kind of debt. Furthermore, the bank of mum and dad will often underwrite periods of job hunting post qualification (remember nearly one million under-25s are unemployed) and have to cover living expenses, rent or the deposit for a mortgage.
Their problem is that they must do all this and plan for their own later years. To make things worse, depending on the solution, this time poor couple may need to see many different product specialists for advice on a pension, an ISA, a buy-to-let mortgage, a SIPP, or equity release, to name a few.
Domestic financial restructuring will become a lucrative source of advice in much the same way accountants plan for owner manager business. This kind of planning might become more necessary for everyone. It is life-time cash-flow management. It ceases to be about product but about outcome. The bank of mum and dad is time poor right now and that is unlikely to improve. 360 degree advice at a sensible price will help them manage their finances and deliver real value.
Much has been written about the advice gap but it should not detract from the opportunity for advice that exists if Financial Services can wean itself off commissions and deliver advice that is more than product sales masquerading as such.
The bank of mum and dad is shouldering many burdens. They do not need product advise but planning help.