The changing face of finance

published 10 November 2015

Taking a look back over how the world of personal finance has changed in the last 15 years, Merryn Somerset Webb finds that she's pleasantly surprised

If you think the world of financialservices is complicated and rapaciousnow, you should have seen it 15 yearsago when we launched MoneyWeek.Back then, if you went to a financial adviser (IFA), you went under the impression that all the advice and help you were given was free. You didn't know that for every product you bought, the adviser got an initial, and then an annual, fee from the product provider every year for as long as you held said product. If a fund came with an annual fee of 1.5%, a good 0.5% of that found its way back to your adviser every year.

It was, I wrote when we were lobbying for change back in the early 2000s, a bit like buying a house and then having to pay for the estate agent to go skiing in Meribel for every year you occupied it thereafter. It also automatically baked commission corruption into your investment cake. Consciously or unconsciously, advisers tended to recommend high commission products over low commission products, and to completely ignore no commission products (such as investment trusts).

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This lack of transparency was a core part of the industry. Most loans of all kinds came with payment protection insurance (PPI) attached. Most people didn't know they had it and didn't know what it cost(I spotted it on my own first mortgage and had it removed). Other insurances didn't come easy either. If you wanted to find cheap car insurance, you had to make five phone calls first to check rates.

It was the same with pensions. When you reached retirement age you had to buy an annuity with most of your money and if you didn't want to be stuck with the rubbish deal offered by your insurer, you had to take up your open-market option and call around all the others looking for a better deal. Thinking back, pretty much the only financial product I can think of that was simple to get was a mortgage!All you had to do was walk into a bank and ask for a pile of cash. Assuming there was a house involved, you walked out again with it 30 minutes later. Easy.

Better still has been the introduction of the retail distribution review (RDR). This outlawed the commission system and insisted that financial advisers got themselves a little more education in money matters than they had in the past. Now if you go to an adviser, you will know if he is independent (ie, he is looking at all the products on the market for you), or restricted (he only looks at part of the market) and, crucially, you will also know what he is costing you. No kickbacks allowed.

The advice might not come as cheap as it should, but at least the price is transparent. We are also beginning to see the rise of 'robo advisers' websites that can take your personal details and come up with a cheap and simple suggested portfolio to suit your needs. If they can be done well (and I think they can), we will be fans of these at MoneyWeek: the easier saving is, the more we reckon people will save.

On to pensions. This has long been one of the most disgracefully exploitative parts of the market. But here too there has been progress. The new 'freedoms' mean that there is no longer any compulsion for retirees to be ripped off by the annuities industry. Instead, we all get to keep control of our own cash for as long as we like. This doesn't come without its problems we are hearing a huge number of complaints from readers about the high costs of drawdown and about the distressingly low rates of interest that drawdown providers are paying on cash. But as far as we are concerned, it represents serious progress.

The same goes for the Isa regime. We like the way expensive and inflexible child trust funds have given way to junior Isas, the way Isas can now be inherited by spouses and the combining of the cash Isa and stocks and shares Isa regimes. It's good. This is not to say there isn't a way to go. There is. We suspect the pensions regime will need more change (we are all for pension Isas Pisas). The regulatory environment for robo advisers needs clarifying. Traditional wealth managers have some serious work to do on the transparency of their fee structure.

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.