Words About Things

It makes sense to get some things for free if you can. Why bother paying for a thing if somebody is giving it away? We are all clearly very much with the idea of free at the moment. For evidence of this, just look at the popularity of illegal downloading for films and music. Getting something for free however might not always be as good value as at first it seems.

There is a saying that there is no such thing as a free lunch, there is also no such thing as free financial advice. Worries over mis-selling by financial advisers seeking commission has led to new regulation governing the industry. It will be against the Financial Services Authority‘s new rules for financial advisers to take commission on the sales of any kind of financial product.

The Retail Distribution Review will change how consumers are able to access financial advice entirely. Financial advisers were paid commissions of up to 8% on products such as mortgages and endowment policies. Whilst this did lead to some fairly widespread incidences of mis-selling the practice did lower the cost of advice for some consumers.

Though stricter regulation is being welcomed, there are critics. For many people the cost of advice could rise. With advisers being paid by commission, those with most to invest were subsidizing the cost of providing advice to those with less. Charging a realistic amount for the time and expertise of financial advisers is likely to work out as more expensive for the less well off.

Those who have a more substantial sum to invest are set to benefit from increase in transparency across organisations.   Properly independent advice is invaluable for any one and established players such as Adam Bank have taken a strict line on this kind of thing, their financial planning page lists transparency as the reason behind theri fee based model, and promises to disclose and refund any commission gained.

A recent study by the financial services company Prudential has shown that only 18% of people nearing retirement age feel that they have saved enough money for a comfortable retirement. Of the 1,001 people interviewed for the study 57% said that they would be willing to work past their retirement age in order to receive more money once they did stop working. While most had money saved up in financial investments and current accounts they did not feel that it was enough to maintain the standard of living they had become accustomed to.

Around 25% of people due to retire within the next year said that they would be happy to work for another 5 years in order to save more money. 7% of participants had considered working for an extra 10 years in order to make their retirement years more comfortable. Only 1 in 5 felt that they were financially ready to retire. Vince Smith-Hughes of Prudential said that these figure represent an issue faced by many of retirement age:

“”Working beyond the normal retirement age is already a reality for many people who either have insufficient savings or simply want a greater income when they do come to retire. But for a lot of people planning to retire in the very near future the state retirement age is sacred and their expectation has always been to retire at 65. Once they reach that milestone, regardless of the amount of money they have, they simply do not want to work anymore.”

Around a third of people expect their standard of living to fall once they retire compared to only 12% who expect their retirement to account for a raise in their standard of living. Most of us look forward to our retirement but these figures show that we must focus on preparing financially in order to be relaxed about our futures. Without significant saving we may find that retirement is a struggle when it should be a pleasure.

A recent report quoted in the Times says that one in five men have a savings account that their partner knows nothing about. These accounts contain on average around £2000 hidden away from prying eyes. Whilst it is not unusual to have separate savings accounts it may come as a surprise to some women that their boyfriend or husband has a secret account. In contrast only 10% of women had an account that their partner did not know about.

One theory is that men wish to have a portion of their savings which are not accessible to their partners. This isn’t necessarily just money to spend in strip clubs and on the horses.  The accounts may be more symbolic than useful although they may also have practical uses. They may be long term investments or instant access savings accounts for day to day spending. They could be used for a variety of reasons:  guilt free spending, risky investments or just to ensure a feeling of independence. The fact that it is men who are more likely to have these accounts  sheds a little light on the differences between how men and women think about money:

“It comes as no surprise that more men have a savings account unknown to partners, and more men make major financial decisions without their partners. Both on a biological and societal level, men perceive such concepts as ‘success’, ‘dominance’, ‘ambition’ and ‘money’ to be bound up together, leading men to view money as the tangible proof of their personal and work success. The more money that is stashed or negotiated, the higher a man deems his self-image and social standing to be.” – Psychologist Donna Dawson

It might not entirely be based on self image however, consider the rise in divorce rates. A secret account may be a less offensive step for a man to take than a prenuptial agreement.  Your partner discovering your secret account may be worse however than both agreeing on a Pre-Nup. Hiding savings (or even worse, debt) is never a good idea however, being open and discussing money must be the best policy.

So if your partner turns out to have a secret savings account should you be worried? Perhaps not but you should necessarily be excited either, only 7% of people with a secret account said that they were saving money to spend on a present for their partner.