Complexity is always good for intermediaries and there is certainly more of that coming down the line. But as with the abolition of commission and the rollout of auto-enrolment, the Budget 2014 changes are also set to alter what will be required from pension professionals specifically and benefits intermediaries generally.
Revolutions always speed up the process of change and the current shake-up of pension advice and distribution structures built up over decades will be no different. The newly created requirement to give something that looks a lot like advice to millions of people at very low cost means that automated advice or guidance services are suddenly very much in demand.
High-net-worth individuals will always want someone to take care of their financial affairs but, as we come down the wealth pyramid, financial advisers will increasingly find themselves challenged by scale solutions. Not only will target date funds, master trusts and other models offering mass market drawdown at low cost put pressure on the lower-fund IFA territory, but so too will the robo-advice models currently under development.
These web-based simplified advice solutions, built from the blueprints of US structures already considered commonplace in that country, are largely still in development – but they are coming, and both providers and adviser firms are getting in on the act.
Providers will try to argue that these will not impact traditional adviser territory – rather that they are aimed at the millions currently not benefiting from advice at all. But it is inconceivable that they will not put competitive pressure on the pricing models of today’s IFA community and ultimately take some business away from it.
Providers, on the other hand, can also look to the intermediaries that are becoming pension providers. Everything is up for grabs and all is fair in love and war.
The positive news is that this competition will push down prices and raise standards, ultimately delivering higher-quality workplace financial services solutions for the nation’s workers and retirees.