Nest needs to offer the same functionality as other providers if it wants equal treatment from advisers. And that means facilitating consultancy charging says Ian McKenna, director, F&TRC
Few in the industry will be surprised by advisers’ robust rejection of the recent suggestion by Nest that firms might carry out auto enrolment work for free, as a potential loss leader for other business. Over 50 people posted a response to the story on Corporate Adviser’s sister publication Money Marketing’s website. It is hard to find any comments that are supportive.
At one level one can sympathise with Nest. It has been set up, at least in part as a clearing house that has to deal with the auto-enrolment cases that established industry providers do not wish to take on as they are not economically viable. At the same time it is committed to doing so with a low cost charging model that allows very little margin for funding the type of support services that advisers and employers have come to expect when implementing workplace pensions.
In the last decade the quality of the technology support provided to establish and maintain group pensions has become one of if not the primary selection criteria. Without technology managing set up and on-going contribution process can be highly labour intensive and create significant costs for all concerned. Technology, implemented correctly can drastically reduce such costs for all parties.
It is entirely fair for Nest to ask advisers to treat them equally with other pension providers, but in doing so Nest should also be prepared to deliver an offering that can compare with the propositions and services being delivered by established corporate pension providers. It should also be prepared to put its offering forward for comparison with those other providers so the adviser community can clearly understand the merits of the Nest proposition in all areas including its advantages and disadvantages.
I know advisers who have had clients suggest that even for an SME their auto enrolment obligations could force them to take on additional staff. Technology is crucial to avoiding such cost which might otherwise erode the actual benefits spend an employer might be able to make to staff. Equally it is universally accepted that member education is crucial helping individuals understand the need for saving. Measuring the support delivered in this area is also likely to be important criteria to be considered.
Nest has been in a situation that many established pension providers would envy, in that it is essentially a start-up proposition with no legacy business or systems to worry about. Against this background I see no reason why Nest cannot build an exceptional proposition to provide all the technology support advisers have come to expect from leading edge pension providers.
But presently its inability to facilitate consultant and adviser charging does put Nest at a significant practical disadvantage. That said, the on-going review of how these charges are to be implemented may yet reduce the impact of this particular issue and at least to some extent level the playing field.
If Nest wants advisers to see it as a true partner then it need to start looking at how it can actually make itself an organisation it is easy for advisers and employers to do business with. Even if Nest succeeds in having the current restrictions on its operation removed, that is to say no contributions above and no transfers in or out, then the test for advisers will still be is its proposition competitive both in terms of the product and the operational offering.
If Nest can lay out a proposition that makes it easy to do business with, that recognises and respects the role of the adviser and provides them with the information and services that will enable them to compete on equal terms with commercial providers, there is every reason to believe significant elements of the adviser community will embrace its offering. If Nest’s operational proposition cannot compete with the service and functionality offered to employers by established industry players it is hard to see how advisers will be able to recommend it. To succeed in the adviser market Nest will need to be able to demonstrate that its proposition, when compared on a level playing field, stands out as the right option for advisers, employers and members alike.
At a time when advisers are having to reinvent their own businesses and commercial propositions in a post RDR world and the FSA is sending the clearest messages about prohibiting cross subsidies, building successful partnerships with advisers will be achieved by delivering the best propositions that can enable the adviser to deliver both low cost pensions and low cost adviser and consultancy charges.