Almost every day I get a call from an advisory firm having trouble recovering costs from advising on auto-enrolment. The problems are less to do with pricing than getting paid. |I’ve been thinking about all the issues that we’ve had helping advisers and I’ve distilled things down into three lessons which, were I still doing the job, I’d try to teach myself. Sometimes it’s easier to see the wood from the trees when you aren’t in the wood!
The 80/20 rule applies
If employers see no value for them in arranging pensions for their staff, they are unlikely to pay an adviser anything more than they have to – just to be on the right side of the law. It’s unreasonable to suppose that just because there’s a law making it happen, that employers should engage with pensions. But it’s reasonable to suppose that a proportion of employers see a payment into the pension pot of others as part of “reward” rather than a risk to the business’ cash flow. I have yet to hear an IFA segment the SME market this way, but to split employers between those who do and don’t pay attention to the pension is as good a starting point as any. Using the old 80/20 rule, focus 80% of your attention on the 20% who give a damn and you are likely to be more productive than trying to knock square pegs into round holes. If you can create a tool that provides employees with compliance at £200, perhaps you can charge £800 to employers who see the pension as valuable in itself.
If it ain’t digital, it ain’t going to work.
Any solution you design either for “compliance” or “reward” that cannot be accessed, used and paid for digitally is going to be at best sub-optimal and at worst a waste of your time. The workforce assessment we us is free to use, it’s results flop into your filing system as a PDF and we’ve seen the entire modelling done in less than fifteen minutes. If you are spending more than an hour producing a workforce assessment for you client, you are likely to lose money. Choosing a pension is harder and more expensive. I spoke to an IFA yesterday who told me that he had spent 8 hours chargeable on a whole of market report he was selling to his client at £750. At her charge out rate, she would lose £850 in recoverable time. I won’t labour the point, a whole of market pension review should not cost more than £750 to the client but cannot cost you more than three hours of your time. These things can be produced to a high standard using digital tools.
You can commoditise your service but you can’t commoditise its delivery.
The point of providing an auto-enrolment is to win the trust of clients, small businesses who have a variety of needs ranging from risk management to wealth management. How you deliver your auto-enrolment is your USP. It’s about what can’t be done by computers – only by personal connection. That’s where the value is. We all know the adage “people buy people” but it’s true, companies may buy reports, risk management and compliance but people buy people. I was an IFA 15 years and know the hardest part was establishing a relationship and the most rewarding part, keeping it. Many of the relationships I built as an IFA I keep to this day. It is on them that we build our businesses.
Can you make money from auto-enrolment?
For most advisers, the answer is no. There are easier ways to skin a cat. But a skinned cat is not a pleasant beast. Building a business around the relationships formed by implementing auto-enrolment will be hard graft, but auto-enrolment needs managing, year after year, there is renewal income in it. The needs of staff increase as their pensions build. The needs of the business cannot be satisfied by google ads or mail-shots, financial advisers may use these methods to open the door but the needs of the business are met when business owners are receptive to advice both on those needs and on how to satisfy them. Auto-enrolment is an opportunity for financial advisers to demonstrate the competence business owners need to recognise before they can trust you to add value elsewhere. I don’t think auto-enrolment can make advisers rich, but it may be the platform for some to build a lasting practice.