The name on everyone's lips or just another dirty word?
A few months back, I bought an Amazon Echo. This is a small black disc, not unlike an ice hockey puck, through which you can access the US retail giant’s voice-activated, cloud-based information service.
To activate it, you use the wake-word ‘Alexa’, and it talks back to you in a not unpleasant robotic female voice. I can listen to music, order a pizza, phone a taxi, check the weather and set alarms - all with only my voice. Notwithstanding the occasional confusion around “snooze” and “news”, it’s a lot of fun!
Despite this, I’m often wondering what the point is. I could do all those things pretty easily anyway. Has it made my life materially better? Do I really need it?
All of this is not unlike the Lifetime ISA (or ‘LISA’). You can invest tax-free, save for a house deposit, or use it for retirement, all with the benefit of a government bonus. Yes there are a couple of glitches to be wary of like exit penalties, but it sounds great, right?
With the 6 April launch date behind us, it is now decision time for savers and advisers. So, dubious opening tangent completed, just where will the LISA sit in savers’ and advisers’ list of priorities?
Yet another ISA?
We now have a growing array of ISA propositions. Stocks and shares ISAs and cash ISAs have been around for a couple of decades and have been an unequivocal success.
In the last few years, we have also seen the introduction of the somewhat vaguely-titled Innovative Finance ISA, Help-to-Buy ISA and now Lifetime ISA.
And that’s before you even get on to what you actually invest in. Will savers appreciate the options on offer, or will they be paralysed by the tyranny of choice and end up doing nothing?
Will you even be able to open one?
The big beasts of the banking and insurance world are yet to play their cards. Is this in itself indicative of the ambivalence towards LISA?
Either way, the resulting lack of marketing dollars won’t help take-up, and a lukewarm reaction in the short term could work against it in the long run.
Will it still be around in five years’ time?
Let’s look at the Help-to-Buy ISA. This was introduced on 1 December 2015. However, with the LISA now catering for the first-time buyer market, it was subsequently announced that you won’t be able to open a new Help-to-Buy ISA after 30 November 2019 (although you can keep saving until 1 December 2030).
In other words, is there a risk that the LISA will be just another Help-to-Buy ISA? There’s no doubt that both are valid savings products, but from a savers’ or advisers’ perspective will you want to put funds into a vehicle when you’re not sure it’s going to exist in the same guise in five years’ time, let alone ten, twenty, thirty?
Would you be better off sticking with a pension?
It’s not new or sexy, but a pension is still a hugely tax-efficient way of saving. Automatic enrolment is starting to build up a head of steam. Will LISA derail pensions if savers eschew the latter for the former?
Many savers might prefer to stick with what they know, particularly as they may already have built up funds in a pension, and may be unwilling to start a new pot elsewhere.
Then again, this could be the product that really energises savings in the target Millennial audience.
Can you pay your adviser from a LISA?
One issue for many will be adviser charging. Of course if a LISA is the right product for a client, an adviser will still recommend it, but the fact the LISA doesn’t facilitate adviser charging is another thing that might chip away at overall confidence in the product.
Coming back to the gadget theme, you could easily make a case that tablets are pointless. However, these have proved a massive success with consumers, and I certainly wouldn’t be without mine. Then again, I also bought a Minidisc player, and I liked that for a while …
One thing for certain with the Amazon Echo is that it’s a talking point (pun intended), and the same applies to the LISA. Will it go the way of the tablet or will it be another Minidisc? It’s too hard to call right now.
But perhaps more importantly, what will my neighbours think when I’m shouting out different women’s names at all hours?