Consultants Advise on Ways to Pluck Us Financial Chickens

Came across this fascinating study by the hot-shot consulting company McKinsey as publicized in a pr piece on the CTV website. The study discusses retirement anxieties of consumers in the United States, at least some of which one might presume would also hold true in Canada, and suggests ways for the financial industry for ways to either better serve us consumers, or if you have a suspicious outlook, to pluck more of our money. It's interesting to see how the industry looks at us consumers.

The report contains this too-true observation about the financial industry, which is almost certainly also the case in Canada and probably the UK:

'' ... our research uncovered a widespread belief among consumers that
financial advisors are primarily interested in "pushing products," as opposed
to providing unbiased retirement advice, and are placing their own
compensation objectives above the interests of their customers.''

It says that comprehensive (holistic and integrative covering all the financial elements not just one at a time), high quality (knowledge of products and alternatives) and neutral/unbiased advice is lacking, with the exception of independent financial advisers. The attached chart from the McKinsey report is spot on as far as I'm concerned. Let's hope that financial companies take the analysis to heart and improve those dimensions of their current offerings. The thought struck me that the report doesn't say anything about the Internet and bloggers - perhaps the growing popularity of such information channels partly reflects the inadequacies of the financial industry.

The recommendations include simplifying offerings but then gives an example of a structured product that sounds much like index linked GICs, something that is generally not a good deal for the investor. Simplification is a laudable aim but it should not be a cover for products that raise costs for the consumer and extract more hidden fees and commissions. One major recommendation is to push reverse mortgages as a way for retirees to stay in their homes while using some of the equity to fund retirement. If that is to be the aim, the high costs of reverse mortgages would have to come down.