The Great Pension Debate was a fabulous success and proves for a second time that Al Rush is capable of uniting a body of pension enthusiasts in a way nobody else can. Good job Al.
The ongoing challenge
Much as I loved the last two days in Port Talbot – I came home last night wondering whether we really got to grips with the wider issues facing people in this country.
Only 6% of us use financial advisers to take retirement decisions, 94% of us don’t. For the 6% who do, the issues addressed over the past two days are relevant but much of the conversation would have passed the other 94% by.
For many people, the big issues in retirement relate to the state pension (barely mentioned), the state pension age, its triple lock, the state of their occupational pension scheme, its indexation and people’s long-term liability to healthcare.
There is a great pension debate going on about whether we can afford to pay women in their 50s and 60s, a state pension according to their expectations. If you read this article you can see why it’s not just women who think the State should.
While there was plenty of discussion of cash-flow planning, that discussion was in the context of the assets and liabilities within the compass of financial planning.
To some extent, my concern is that by defining the agenda on their terms, IFAs and their regulators ignore the unregulated world of retirement decision making that the 94% live in.
What can you do if you don’t have an adviser?
This is of course a question that the FCA obsess about. They are right to. We have nearly 10m new pension savers in this country and most of them will never access financial advice in the conventional sense.
One delegate at the conference mentioned the threat of “robo-advice” as if the provision of digital information to the non-advised was a danger. The danger to IFAs is that in failing to adapt to a digital world, they find other advisers doing their work more efficiently and therefore more cheaply than then. The demonstration of Cash Calc. by Niche’s Ray Adams demonstrated how licensed software can challenge conventional planning techniques. It would not be hard to convert this software to provide people with a means to DIY their cash-flow modelling.
Creating the capacity for people to avoid using financial advisors may seem the opposite of what an adviser wants, but do advisers really benefit from a world where 94% of people are excluded from financial planning?
What can you do if you have a duff adviser?
On the final afternoon of the conference, delegates were confronted by the reality that follows bad advice. The steelworkers and spouses who turned up to testify about their experience of BSPS “Time to Choose”. None of them had used an adviser for pension planning until last year and all of them were now considering litigation against their adviser.
The takeaway on social media was that Darren Reynolds was the rotten apple, but the number of firms that have “voluntarily” shut up shop on BSPS transfers, suggests that the problem is wider than that.
There is no point in isolating Port Talbot as a special case when the mechanism that brought bad advice to the steelworkers, remain in place. The ecosystem of introducers that delivered Darren to the steel men’s doorstops included the Government’s own money advice service which endorsed unbiased which put forward Active Wealth Management. No need for sausage and chips and a £1500 introductory fee to ensnare Peter.
While we heard from Philippa Hann that there is recourse to the courts, should we really be relying on no-win, no-fee to restore order?
If advisers are going to advise on transfers, they are going to have to create much greater friction in the advisory process, than happened in Port Talbot. So long as we have contingent pricing, I fear that we are storing up problems for the future.
Did we really have a “great” debate?
Keith Richards of the Personal Finance Society demonstrated how a strong trade body could improve the standing of Financial Advisers in the professional community and to their clients. But he spoke out against IFAs “blogging” on contentious issues.
To a large extent, the conference was about the work of Al, myself and Jo Cumbo in publicising that all was not well in Port Talbot. The Great British Pension Debate is not just about how we can improve the standing of IFAs (which is important), but about how we alert the regulators, the Government and the general public of menace.
Had we not blown the whistle at Port Talbot, the steel workers on the stage and many others might never have had a voice.
Again, we need to ask about the wider social purpose of financial advice. Is it enough to define advice in terms of how we manage drawdown, the soft skills that enable advisers to understand their clients and the products that can be used to manage wealth through generations.
I would say it is not enough.
It is important that advisors are there for people like the steelworkers, who have to consult advisors at a time of choice. That is what Al Rush’s Chive operation was set up to do and I support it.
But Chive can only do so much, there are only so many pension transfer specialists prepared to give up time to deliver the information for people to make informed choices.
I would have like the debate to have widened to consider what happens when advice runs out.
Widening the debate.
My job is to challenge. As Chair for the past two days, I could not challenge – that job is for the delegates.
I will continue to challenge IFAs , as Paul Lewis did, to ask themselves some difficult questions about the scope of their service, the way they get paid and their ethics.
That is not a bad thing.
There are 145,000 Royal Mail workers who want a non-advised solution which gives them a wage for life. I suspect there are many like them who had previously expected a defined benefit but are increasingly reliant on that unholy trinity of cash-out, non-advised drawdown or annuity. The Great British Pension Debate needs to include them,
There are millions of us, struggling to understand why the state pension has to go back and we have to work longer. We need to better understand our capacity to work and the inability of the State to underwrite changes in our longevity.
Those same millions – a generation approaching that tipping point when they start spending their retirement savings, have no way to trace, analyse and aggregate their pension pots. The creation of a manageable dashboard which allows all this to happen is further cause for debate.
In truth, IFAs can only do so much; but they should not think that because they are not involved, what is happening is a threat. Instead they must accept that advice is a minority sport (like fox-hunting) and that they are serving only 6% of the population (not even the mass affluent who account for rather more).
Putting the Great Pension Debate we have had over July 10-11 in context, we should all recognise that whatever part of pension practice we work in , we are small cogs in a bigger machine.