Inflation, AI and a Rather Expensive Cup of Tea
Episode 108: The Verdict on a Noisy Week
BlackRock's managing director just questioned, on the record, whether the proliferation of funds has served the asset manager rather than the client.
At the European Funds Conference in Dublin, Gavin Lewis, Managing Director of BlackRock, said plainly that the industry needs to ask itself who the endless launch of new products actually serves. Whether it leads anywhere is a separate matter. We covered this in episode 108, along with a few other things that deserve your attention.
The Freddo Index
Government CPI figures say inflation is running at around 3%. A Freddo chocolate bar says otherwise.
A couple of years ago, a Freddo cost 25p. It now costs closer to 50p. That is roughly 100% increase. A Pret meatball sandwich went from £4.00 in 2020 to £7.40 today: an 85% increase in six years, compounding at around 10% per year. A first-class stamp was 76p in 2020 and is £1.80 today. That is a 137% increase in six years.
The point is that the gap between official inflation figures and lived experience is real, it compounds, and it is one of the strongest arguments for investing that exists. Cash and bonds at 3% erode purchasing power. That conversation with clients is worth having plainly.
HSBC and the AI question
HSBC reportedly plans to cut up to 70% of its wealth adviser workforce. The headlines called them advisers. We would push back on that framing.
What HSBC employed was a sales force: rotating, transactional, product-led. The relationship model that defines genuine financial planning was a different thing entirely. Once commission disappeared post-RDR, the economics of that model were always going to struggle. AI has accelerated the conclusion, but the problem existed before it arrived.
The more interesting question is what this signals for the profession as a whole.
Our view: the work that full-fat financial planners do requires a human in a room with another human.
Consider the level of trust involved. After just few meetings, a new client may agree to transfer their family's life savings to a platform and funds they have never heard of, simply because they have confidence in their adviser.
That is the strength of human relationships, and it's something that shouldn't be underestimated.
AI can build a Voyant plan. Andy has tested this: Claude produced a solid first attempt, roughly 8 out of 10, on a complex brief, in half an hour. That is genuinely useful. But the plan is the input, and the job is everything around it.
The annuity pricing problem
This one is practical and worth knowing about if you work in this space.
Non-advised annuity providers, Hargreaves Lansdown being the most prominent example, and another firm called Retirement Line, can offer rates that advised routes may struggle to match. In some cases the differential can be 20% or more on annual income, which can add up over the life of the policy to a difference of tens of thousands of pounds.
Under Consumer Duty, an adviser who facilitates an annuity via the advised route at materially worse rates than a client could access directly faces a real tension. It is worth considering.
One more thing
We received a review this week that we wanted to share. An anonymous adviser wrote to say he had used the phrase 'full-fat financial planning' as a kind of password at the Finance in Society Research Institute annual conference. Roughly half the room responded in a way that told him they understood what it meant.
He has since accepted a role at a firm that does this properly.
More of that, please.
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Episode 108 covers all of this in full, including the platform consolidation question, the Inheritly platform for estate planning, and Alan's story about the most expensive cup of tea ever served in a Bond Street boardroom. Watch the full episode via the link below.
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P.S. The TRAP Forum thread on platform consolidation, prompted by Philip Dragoumis, is one of the better discussions we've had recently. If you are in the forum, you are getting the conversations that do not make it to air. If you're not, check it out HERE.
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