Thanks to Andy Dickson for drawing my intention to this article in FT Adviser

National Employment Savings Trust, the government-backed auto-enrolment scheme provider, has revealed that 99 per cent of the 300,000 people that have so far begun making contributions are opting to use the default fund, raising questions over the effects of a lack of financial advice.

The inverted commas in the title are mine, the admission supposedly Mark Fawcett’s (NEST’s Chief Investment Officer).

When quizzed about whether the 1 per cent who choose a fund other than Retirement Date were receiving financial advice, Mark Fawcett, chief investment officer of Nest, admitted many of those in the alternative offerings are Nest staff members. He said he would guess that they had not received financial advice.

Let’s take a peep behind the numbers. NEST has 300,000 members who have contributed £12.4m as of the week before the last (the last time I asked). On average , the contribution per member to date is around £40. Exactly how much do we expect advisers to get paid for advising?

NEST’s membership includes 1% (let’s say 3000) people who have chosen to invest in alternative strategies. This is lower than you’d find in a typical occupational DC plan and may reflect a lower degree of engagement with financial decisions than elsewhere but this shouldn’t surprise us. NEST is set up , not for the people who know, but for those who don’t know about investing.

According to the article, of the 3,000 investors (those who know)

most of the contributions are heading to the Ethical and Higher Risk fund, with only about 100 people so far putting cash into the Sharia fund… nobody has selected the Lower Growth fund

NEST would argue that the more you know and the more you engage, the higher your appetite for risk. I would argue that I see plenty of appetite for risk from people who know nothing (research conducted in Ladbrokes most Saturday afternoon). NEST is a paternalistic organisation with a bias towards protecting people from investment risk – that said is the financial consequence of a degree of “reckless conservatism” as bad as the whiff of cordite from a growth strategy that goes wrong (ask the Archbishop of Canterbury).

But back to the import of the article. The suggestion is that investment strategies become more diverse when advisers are involved. Undoubtedly this is true as is witnessed by the dispersion of fund selection on individual wrap platforms. The question is whether this dispersion of decision making leads to better outcomes and on that the jury is out.

Undoubtedly financial advisers feel they do a good job and undoubtedly there is a high degree of satisfaction among their clients (who are clearly not in NEST!).

I am very glad that there is at last a place where I can – hand on heart – tell people with no financial sophistication- they will be looked after. I would happily invest in the NEST target date default fund (pre-OAP cohort) and I thoroughly endorse what is going on in their investment department (with my usual reservations about wreckless conservatism towards those with longest durations in the funds).

I am very glad that their are financial advisers who serve the needs of the investing classes and I’m very glad that I can operate a platform for both at http://www.pensionplaypen.com

I am not alone in this seeming aberrant acceptance of a segmented market. My friend Russell Bavington up in Leeds runs a good business (autoenrol me) which operates NEST and a SIPP platform as complimentary options.

NEST and the institutional value set it promotes can sit alongside the retail approach of the IFA. There need be no admissions (I’m sure there weren’t). Advisers have nothing to fear from NEST- the people who want independent financial advice would rather stick needles in their eyes than hand a Government Quango their hard-earned cash.

The country (as I do) needs a strong and various financial sector and it’s getting git back. Now let’s stop worrying about whether the market’s works. Though we’ve had 25 years of distortion, we are at last returning to some kind of sanity where a man’s savings can be invested fairly alongside his fellow man’s – with a degree of confidence.

NEST- no admission needed!