As the RDR takes effect and adviser numbers decrease – either because they are unable to compete for high net worth individuals or unwilling to re-train – it will make sense for today’s pensions advisers to offer more than ’pensions’ advice. Offering whatever this through the worksite, is mutually beneficial to the adviser and the employer.
Today directors are more personally accountable than ever before, for all areas of the business. Shareholders want to see better performance in ever decreasing timescales and market sentiments change fast, sometimes on rumour alone. Employers have fiduciary responsibility for their funds, leaving them liable to legal challenges, so it is no wonder that they are keen to reduce risk at the first possible opportunity.
To move away from this risk, to be winners from a new dispensation, most companies are now moving en masse from the trust-based model, which leaves ultimate liability with the employer, to a contract-based approach where an external provider administers all aspects of employee pensions. This cuts risk and liabilities and gives early adopter companies a definite competitive advantage. It also puts pressure on other corporate pension providers to follow suit in order to achieve similar balance sheet and fiscal benefits.
I see now as the time for progressive change for intermediaries, particularly those who are finding current changes in the world in which they operate profoundly uncomfortable. Employee benefits consultants and corporate IFAs are having to deal with the fact that new regulations in the UK related to the Retail Distribution Review are creating a hard divide between general advice – potentially free and very much at headline level – and specific guidance, which is subject to greater regulation, paid-for and potentially an expensive service.
The mass market middle ground, where many intermediaries used to operate and make their money is now untenable for them. They are left with the uncomfortable choice of either moving upmarket and facing increasing competition for a smaller number of high net worth individuals, leaving the profession or adapting and treating the changes as an opportunity.
The mass market middle ground, where many intermediaries used to operate and make their money is now untenable
However, I believe there is potentially a viable model which leverages the growing number of self service ’aggregation’ and ’planning’platforms entering the market. In this case it is viable for the intermediary, if the client pulls their own information together rather than the expensive intermediary doing this for them. If this can be done then the adviser’s time can be focussed where it adds the most value ’providing advice’ and not in data collection and basic education.
Intermediaries can potentially team up with self-service portal and system providers to reach people in the workplace and it makes sense for an adviser to ’front it’ here. This could result in giving the adviser an economic way to deal with their client and a business model which starts to look viable for the corporate. It could even go some way towards ensuring the morale of key employees is maintained or improved, as they start to see some benefit from this type of support.
Most advisers are not going to be able to afford to create their own platforms. Only a few big players will be able to do so and the focus will remain aimed at higher net worth individuals, rather than the mass affluent. However, hope remains, as many providers are bringing worksite offerings to market, such as Scottish Widows’ ’Mymoneyworks’ platform, amongst others.
The focus of these varies from a savings and investments focus and a traditional ’push’ style of marketing to a more holistic ’pull’ style. For me, this differentiates ’corporate wrap’ from ’wealth management’, changing the focus from ’asset acquisition’ to ’long term customer relationship’.
The message is, start preparing these now by taking a look at the new platforms entering the market. Consider how these will mature and their appropriateness to facilitate access to the mass affluent market.
Consider too whether self service offers the appropriate focus and the fact that, regardless of education material and guidance and planning tools, ordinary people still need advice. I believe the changing face of worksite benefits provision, coupled with these new platforms, offers the corporate an opportunity too good to miss.