It is a truth universally to be acknowledged that the man who bills the client is likeliest to get rich.
We have got used to insurance companies and advisers controlling the price of our pension savings schemes.
But by April 2016 advisers will not get rich or stay rich from sharing the member borne charges.
The cumulative impact of RDR, the ban on consultancy charging and the abolition of commission within workplace pensions has all but stopped advisers advising on workplace pensions.
Advisers have never been much good at invoicing clients and it looks like they’ve not worked out a way to bill SMEs and micros. Many advisers are walking away from auto-enrolment because they can find no way to be paid.
Meanwhile employers are, according to recent research from NEST, turning to accountants for advice on how to be AE compliant and using payroll software to manage AE’s implementation and management.
It is payroll and not the advisers who are getting paid.
But if you ask those who create the payroll software modules that do the heavy lifting what it is they need, they will tell you they need financial advisers.
The two burning issues are
- how to deal with member queries arising from auto-enrolment
- how to select the right pension
But advisers tell me they don’t want to do this work any more. They have given up on answering mundane questions like “how much should I save” and “how do I get my tax relief” for Lamborghini avoidance schemes and discretionary wealth management.
Similarly with provider selection, the emphasis is no longer on getting the right scheme for your staff but on buying into the vertically integrated master trust that gives access to your unique style of DFM.
Meanwhile, the goals are being taken down the other end of the pitch – or on a different pitch altogether!
11.000 of the 43,000 employers who have staged so far, have staged with NEST. Employers who NEST interviewed for NEST insight reported that they had at best looked a at a couple of other mastertrusts, at worst they had simply used NEST as a default.
18 months after the OFT reported that they had seldom met such poor purchasers as employer buying workplace pensions, has anything changed?
Advisers need to seriously re-think what they are about, if they are to play a part in auto-enrolment going forward.
It’s time that we got back to basics – providing financial advice to individuals (regulated) and to employers (un regulated).
For the first time ever, the Pension Regulator has found there are more people actively in occupational DC schemes than DB. At the end of January it will write to 1.5m employers reminding them of their duty to stage auto-enrolment.
This seismic change in the way the nation saves appears to be a non-event for many financial advisers.
The conclusion that anyone who approached this as a pure business consultant would be that financial advisers need to be finding ways to be paid by accountants, in particular by the payroll bureaux that accountants and book-keepers manage.
I suspect that there may be a little bit of business snobbery at play here as I don’t suppose the golf clubs of the shires have a lot of payroll operatives on the membership lists .But if financial advisers want to make any money out of these changes, they may have to get their hands dirty and accept the patronage of the hoi-polloi.