There may be many reasons for this, not least the potential conflict of interests that members might perceive in dealing with their employer’s adviser. With only a handful of providers still paying commission on group schemes and the group arrangement potentially contributing the largest lump of an individual’s retirement income, there must be a strong case for firms exploring the additional revenue opportunities that exist.
Where firms want to develop such relationships it will be important to start the process long before retirement. Recent research published by Aegon shows that 42 per cent of people aged between 50 and 65 when questioned had no idea how much income they would receive from their pensions in retirement. In the same survey only 8 per cent of respondents were comfortable that they would have an income of over £20,000 per year when they retire. Additionally, more than half those questioned, 56 per cent, indicated they intended to carry on some work after retirement. For all these individuals, some financial planning will clearly be essential.
Any firms interested in developing in this direction, but lacking the necessary personal financial planning software to back up such a service, may want to take a close look at a new online retirement planning software service offered by Standard Life. A demo of the service can be found at http://www.brainshark.com/brainshark/vu/view.asp?pi=145463217.
It is clear that this package has been put together with the objective of supporting an ongoing relationship between adviser and consumer. In a process that is at least as well developed, if not better, than some of the services offered by paid for financial planning software, the adviser is able to enter detailed information about the clients’ current and future income needs, their full range of investments and savings designed to meet these needs and then to model likely scenarios in order to identify the best options for the client. The system then produces a range of reports for both the adviser and the client to document the process, recommendations and actions taken.
The process is designed to be repeated on a regular basis, allowing for the updating of investment values, amendment of goals and objectives and review of progress towards those goals and objectives. Where arrangements have not reached expectations, there is the opportunity at each review to carry out further modelling. By constructing the software in this way Standard Life is giving the adviser valuable tools necessary to build an ongoing advice practice and while in the longer term firms may opt to invest in a stand alone solution, in the interim this service looks very valuable for those who want to test the water.
Earlier this year Funds Network showed me a powerful set of planning tools they plan to launch in the coming months and other providers have similar services of development.
Just as it has now become de rigueur for product providers to offer portfolio planning tools free of charge to advisers, another practice originated by Standard, I anticipate that over the next few years, driven in not small part by both the RDR and Money Guidance, retirement focussed planning tools will become an essential part of any serious pension providers toolkit.
In addition to services designed to help advisers carry out such reviews, it is inevitable that over the next few years we will see a significant number of direct to consumer services emerge that will offer the same functionality on a self-service basis. Indeed there is a strong argument that any life office that is not also developing exactly this functionality is missing a trick. Consequently I believe that those expanding their business in this way need to be acting now to establish an ongoing review process with scheme members as well as employers.
It is a natural consequence of personal accounts that a far wider range of organisations will become involved in the provision of retirement advice. Firms from the group market that want to expand to take a wider share of the individual market should, in my view, look to harness the increasingly sophisticated planning tools that are becoming available and stake their claim in the new landscape long before the planned changes come into force.