First Actuarial provides financial education in the workplace. This is paid for by fees by employers wishing to promote financial well-being and the use of the employee benefit plans in place. Typically these are a mix of pensions, share schemes and risk benefits.
Our interest in a retirement adviser directory stems from the call for advice we find when talking with employees close to retirement. We run a rating system for employers at www.pensionplaypen.com which is designed to help employers choose a workplace pension. Since there are over 1 million employers yet to do so, the ambition of this website is similar in scope and scale to the ambition of a “retirement advisory directory”.
Consultation Question 1:
Do you agree there is a need to improve the customer journey towards regulated financial advice?
Yes- we define advice as the provision of a definitive course of action, Many people are not satisfied with options- they want advice and they want to know that they are choosing a good adviser at a reasonable price.
Consultation Question 2:
Do you agree any new directory should also include details of advisers who specialise in the post-retirement advice market?
Yes – this is a good idea- we are impressed by SOLLA. We would like to think that organisations that “fulfil their obligations” under the Care Act 2014 can do so with some conviction and not simply to tick a box.
Consultation Question 3:
Do you agree that a new retirement adviser directory might provide a solution for those consumers needing regulated retirement advice?
We think that the Guidance Guarantee offers a one off opportunity for a directory to be created that is properly constructed and maintained. We are aware that there is no satisfactory directory at present, not least because, like MAS, we have been looking for one. We share MAS’ frustration and want to help in solving this problem with a decent solution.
Consultation Question 4:
Do you agree that information regarding fees should be included in the directory?
We do; people want to know whether the price of the service is appropriate for their needs- many will find an expensive service appropriate, many will look for cheap and cheerful and some will opt for something in the middle.
Consultation Question 5:
If so, do you have any views as to how this might be presented to consumers? For example, should there be a ‘menu’ or list of services with average or approximate costs given for each service?
We think it should be by means of symbols £ ££ £££ not by nominal amounts. Advisers who are pitching low and use Skype get £, advisers who are pitching for the mid-market get ££ and those who want wealthy customers get £££. On-line sites find that this system works much better than trying to get people to compare numbers. The decision about how many £ to award an adviser should rest with the directory administrator and while open to challenge, the final say should rest with them
Consultation Question 6:
As well as contact details, qualifications and expertise, type of service offered and fees charged, is there any other information you think the directory should include on the adviser firm or individual advisers?
There needs to be a customer feedback rating based on experience. This is how trip advisor works and though this will be contentious, provided only those who have been through an advisory session have the capacity to rate, this is the best solution. Every service industry (from the sex industry to plumbers) offers this service and financial advisers should not be exempted. The feedback rating will in time become the most important aspect of the site and every person advised needs to be encouraged to use the review facility which must be independently managed without interference by advisers.
Consultation Question 7:
Do you agree that an independent panel should decide on the entry criteria for the adviser directory?
Yes. There are 23,000 candidates and there need to be reasonable barriers to entry. We think that not more than 2500 advisers are needed to service the needs of the 3-400,000 people a year taking retirement benefits. By advisers, we mean advisory firms. Any more than this number and accreditation would be diluted and the process of maintaining the directory become too labour some.
Consultation Question 8:
Do you agree that the main consumer and adviser professional bodies should be invited to join the independent panel? If so, can you suggest the particular bodies you feel should be invited to be members of the panel?
There is a danger when you go down this route that the committee gets packed with token representatives. We would favour four or five named individuals, chosen by the Pensions Minister for a fixed stint rather than simply dishing out places to the usual suspects.
Consultation Question 9:
Do you agree that the Money Advice Service should host the directory?
Yes; with reservation. MAS is funded by advisers and is to that extent conflicted. But it is properly resourced, is IT savvy and we can think of no better candidate. That may not sound like a ringing endorsement (and isn’t) but this project could be an opportunity for MAS to shine. If MAS is trying to keep in the adviser’s good books , they should not be allowed to run this directory (see below).
Consultation Question 10:
If not, is there another organisation you feel should host the directory?
We don’t think that the various IFA trade bodies should. They are in competition with each other and giving it to any would put them at each other’s throat. An independent firm of actuaries with no vested interest could do it but would be unlikely to want to! The need for “thick-skinned independence” narrows this down to Government bodies,NGOs and a few charities. Other than MAS, we do not see the full set of competencies.
At a recent IFA conference, we asked this question and the response from the body of the audience is “anyone but MAS”, based on the unanimity of this response, it may be that MAS, in being disliked across the board, may be the best choice for all IFAs
Consultation Question 11:
Do you agree that data management and verification plus on-going maintenance should be outsourced to a suitable organisation and paid for by the host organisation?
Yes we do; and this doesn’t need to sit with a financial services company. It may be best to use an organisation used to running a similar service outside of financial services. That said, an organisation that understands financial advice and has the technical ability to verify and the data management capabilities to manage the database is the ideal partner to whom to outsource.
Consultation Question 12:
Do you have any suggestions as to which organisations should be invited to tender for the data management and verification services?
Those organisations used to running similar. First Actuarial would be interested in tendering
Consultation Question 13:
Are there any other benefits to consumers or advisers in establishing a new directory?
We think this would create unity in the IFA community over time and set benchmarks for service and delivery to a sector of financial services which is fragmented and badly organised.
Consultation Question 14:
Are there any disadvantages of establishing a new directory that we have not envisaged?
Any attempt to herd cats comes with disadvantages. Unlike actuaries, IFAs are extremely assertive and outspoken, expect the IFA websites and trade press to be humming with indignation at every stage of the creation and management of this database. The only way that it will work is on the basis that it is equally loathed by all on the sell side and trusted by those on the buy side.
Henry Tapper – August 12th 2014