Pensions advisers are being squeezed out of the industry just when they are needed most says Ronjit Bose, commercial director, Jelf Employee Benefits
In these modern and enlightened times, it’s all supposed to be about balance. Managing the challenges of a given situation with an appropriate response, to keep things in check.
We are all advised to ensure the most important balance, the work-life balance, is kept under control, so we don’t allow ourselves to become swamped and drown, whilst at the same time ensuring there are enough challenges to keep us engaged and alert.
What’s happening in the pensions and workplace savings market suggests that things right now are currently out of balance. The seesaw is being pushed too far and the potential victims are not only advisers but employers and arguably employees, avoiding or being persuaded away from good advice. I hope you don’t have to be adviser to realise this is not positive.
Let’s think about what’s going on right now. The double-barrelled impact of auto-enrolment and the Retail Distribution Review has sent shockwaves though the industry. It’s not all bad, but it’s not all good.
The pensions market is complex and for the most part employers, let alone employees, find it bewildering. Granted we all know well-informed and well-educated employers who know what they want but the majority need help to get their planning right. Where are they going to get that help? The government?
As advisers helping larger clients stage right now we are close enough to it all to know that auto-enrolment really is complicated if you truly understand the detail. For employers to understand their options and responsibilities and avoid the much-talked-about fines that inadvertent non-compliance can bring, they need to get clear and unequivocal advice.
The workplace and the financial decisions made there are becoming the true hub of planning and education. The workplace pension, even before the advent of auto-enrolment, had already grown to become the central financial purchase around which other financial choices are made.
No one would argue that the most important goals are positive and constructive member outcomes: with the members initially identifying and then achieving the goals relating to their pension. Not only that but they should arrive at their destination with a clear understanding of what to do next; annuity, investment, drawdown, whatever; with confidence in their options and a clear sense of risk and reward. Yet to achieve much of this, a member needs support and advice, something that may become more difficult to access.
The removal of commission from the market in favour of fee-based remuneration has generated many column inches but as we progress with auto-enrolment, how many companies are going to raise an eyebrow when presented with what is a perfectly reasonable and fair fee for the work we as advisers will have to put in to support them through it? Having never paid for advice in this way before, this is going to come as a shock to many.
The supposed middle ground, consultancy charge, is in disarray, with pressure from many to scrap it entirely, amidst a confused position from the likes of the Department of Work & Pensions as well as many of the insurers on where they stand now and in the near future.
The requirement for an increase in qualifications and standards is difficult to argue with in principle but it’s clearly had an impact as the number of advisers leaving the industry is increasing each week.
Is it too early to talk of an adviser exodus? I’ll leave it to you to decide where you stand on that one but what is certain is that these advisers are leaving at the most crucial time for the industry. Without question, some of them will have reached the end of the road naturally, but it’s all too easy to slip into the position of self-righteous justification for their departure.
As we move into the new RDR era and into the growing rump of employers gearing up for auto-enrolment, we enter an environment that will probably see continued disruption and evolution. We’re already seeing increasing pressure and PR from lobbyists and consumer groups around charges which may in turn bring further momentum for more change.
None of this reflects the work involved or the complexity of the challenge. But it makes those of us that remain more dedicated to the cause, because now more than ever there is absolutely no doubt, there is a need for good advice and good advisers.