We should act as financial guides in our communities

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Nov 14, 2019

For someone so proudly Italian that I have steadfastly refused to apply for a UK passport despite having lived in this country for more than 50 years, I am rubbish at being a godparent.

Years ago, an old school friend asked me to be godfather to his son. To my eternal regret I accepted. I say ‘regret’ because, in the past 15 years since moving away from London, I’ve barely seen my young godson.

I can’t help feeling I’ve let down both him and his parents.

Lately, though, I’ve been pondering on the role of godparents and how they are chosen to fulfil a function that, certainly in Italy, is one of the most important for protecting a child’s best interests – apart from the direct family itself.

Part of this reassessment was motivated by a recent article in Money Marketing by gbi2 managing director Graham Bentley, who wrote about changes in the way young people see their financial lives progressing compared to those from our generation who were brought up in the 1960s, ’70s and even ’80s.

Graham makes the point that, back then, free education combined with new expectations of social mobility and equality bred a generation comfortable with the idea of progressing through life and providing for themselves and their families, possibly with state support if needed. Although ideologically different from its predecessor, the ‘Thatcher generation’ was influenced by the ethos that, if you were ambitious and worked hard, you could make it in the world. The drive to climb the property ladder was part of that cohort’s goal setting and we still see echoes of it today.

As Graham points out, though, much of that hope for a better, or more affluent, lifestyle than that of their parents has been dramatically damped down for today’s 25-to 30-somethings. He cites the FCA’s discussion paper, DP19/2, ‘Intergenerational Differences’, published in May, which suggests the new generation of 20-somethings “faces much greater difficulties in accumulating wealth. They start careers later, struggle to get on the housing ladder and carry higher debt”.

Graham says: “To achieve outcomes equivalent to the [1960s] boomers’, today’s savers would need to achieve investment returns of almost 50 per cent per annum between the ages of 20 and 36, 7 per cent over the next 15 years, followed by 6 per cent until retirement. At age 67, they are likely to be still paying a mortgage, assuming they ever get to buy a house.”

Today’s young generation is more reluctant to seek financial advice, either through lack of understanding or, perhaps, because they think it won’t make any difference

I was amazed by these figures. As if the many societal obstacles standing in their way were not enough, there is also the fact that today’s young generation is more reluctant to seek financial advice, either through lack of understanding or, perhaps, because they think it won’t make any difference.

Graham’s solution is that the industry “should return to being both inspirational and aspirational, and increasing the wealth of the many rather than preserving the wealth of the few”. It may sound airy-fairy, but I see what he means.

We also know that price plays a part in many people’s decision on whether to seek financial advice. The Lang Cat principal Mark Polson recently cited research for one of his clients that, while fewer than one in 10 people had paid for advice of any kind in the past two years, up to six million people would be willing to pay for advice if it were cheaper.

Mark suggested that “people aren’t sure advice will save them money, and they aren’t sure they can trust advisers”. New robo offerings such as Nutmeg and Scalable Capital are entering the advice space and may be doing so in a way that is understood by and more palatable to today’s always-online generation.

There is also lots of evidence that financial advisers can help you achieve financial goals. Advisers all have access to that kind of research, not least new figures from Vanguard, published in Money Marketing.

Long-term strategy

I’ve also been thinking of how best to support young people in understanding the benefits of a long-term financial strategy; which takes me back to the role of godparents. Maybe, now that my godson is about to leave university, I may be able to redeem myself by standing alongside his mum and dad and acting as his mentor.

If I were to help him find a financial adviser and contribute to any advice charges for a year or two, would that help set him on the right path? It might. If all of us were prepared to act as financial guides in our communities for those who didn’t have godparents, that would help.

And if, instead of godparents being selected based on familial ties or random friendships, they could be assigned when a child was in their teens, or even chosen by them, and on the basis of financial soundness and mentoring skills, that would help too.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

Follow him on Twitter @niccicutti

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