Employers are prepared to pay for advice for retiring employees, says LEBC chief executive Jack McVitie. But a bionic approach, rather than robo, is the way to service this massive market, he tells John Greenwood
“We have a simple goal: to transform access to top-quality advice,” says LEBC chief executive Jack McVitie.
“And we are scaling up to meet this challenge. We are already advising in numbers way beyond what was being imagined three years ago.”
The firm’s 75 advisers and 85 support staff managed to give advice – including personal conversations on at least two occasions – to a total of 12,000 individuals last year and McVitie wants to see business growth – which was 25 per cent in 2015 – continue its upward trajectory.
For help with the journey, LEBC engaged with a consultancy that had worked in the retail industry. McVitie says: “They said to us: ‘You told us you were backward – and you really are. We have never seen so much shoe leather and paper.’”
The strategy that has emerged is a plan to increase the level of automation in the advice process, although McVitie prefers the term ‘bionic’ to ‘robo’.
“We want people and systems working together, to allow the adviser to do more.
“We believe people want to talk to someone, particularly in the fact-find stage. The hard facts they can input themselves; the softer facts come through in conversation.
“And because you get a lot of people engaging through the process, the client’s position can change as they are doing the fact-find. Then, when you send them the report, there are usually two or three key points they will want to talk to someone about,” he says.
LEBC has developed proprietary technology – with third-party developers and partners – which it is yet to bring to market.
“We haven’t decided whether to keep it in house or distribute it to the market,” says McVitie, who wants the regulator to take a mature approach to decent adviser businesses addressing this key market issue.
“If you look at auto-enrolment, People’s Pension took on 2,000 schemes in a single day this January. When it comes to the advice gap, I’d like to see the regulator take a similar approach of trusting the industry to get on and do it.”
LEBC has found that employers with both DB and DC schemes are increasingly prepared to pay for financial advice at retirement, ranging from £500 to £1,000 although, in certain circumstances, they are paying up to £2,500. The standard £500 offering is for advice given over the phone and internet, with a £1,000 fee for face-to-face, depending on the complexity of what is being done.
The torrent of change, notably pension freedoms and the reduced lifetime and annual allowances, means the firm must prioritise who it sees.
“At-retirement is also a huge area and we are placing more annuity business than ever before,” says McVitie.
“The pension freedoms mean people who are single and in ill health – factors the scheme won’t recognise – can get a better pension by transferring out and then buying in guaranteed benefits through an annuity. These transactions tend to be for larger amounts and can be a very good deal. One woman managed to get a pension 30 per cent higher, with 5 per cent fixed escalation rather than LPI, and her covenant has been improved considerably.”
The firm has its aeComply proposition, in partnership with Aviva, which is targeted at book-keepers, but McVitie sees little sign of an auto-enrolment rebroking market.
“Some people have had difficulties and need their scheme looking at again but, in the main, people are taking the view that they may not have the best pension in the world but they have more pressing things to worry about.”
But the workplace is key for LEBC’s growth model – with millions of individual advice clients wrapped up in corporate pension schemes. Building the model that taps in to this huge market could prove rewarding.