Does guidance have to be sold? If we are to understand the FCA’s latest informal consultation, we need to start with that question as it is posed by the provocative title of the FCA’s initiative.
FCA are looking at the extent that guidance can be commoditised and delivered at a bulk rate. But to target the value of guidance, we need to move beyond Pension Wise’s claim of 94% “satisfaction” and get to 94% “taking action”.
This blog asks how people are buying guidance, who is selling it and where the financial transaction is taking place.
Whether as financial advisers, benefit consultants of specialists in “financial well-being”, the large numbers of people engaged in offering financial education in the form of guidance have one thing in common – they need a buyer.
Services offered need to be paid for, if they are to be sustainable. The purchaser of the services may be an employer, it may be a member of staff or it may be the tax-payer (who picks up the bill for Pension Wise and the organisation behind it).
And where there is a buyer , there is a seller. Advisers cannot pretend that they are not selling their service when advising, they will not get referrals or repeat orders if they do not make it clear to their customers that their value proposition is a) worth devoting time to and b) worth paying for.
So the FCA are simply stating the nature of the model they are considering – and concluding, rightly, it is a sales model.
The sale of guidance
I asked a question yesterday at the launch of the SMF’s report on
“Preparing for the golden years: How to improve pensions advice and guidance”
My question was whether MaPS should adopt a sales process to make its delivery of guidance more effective or whether this should be put in the hands of the private sector. My expected answer was “both” which I got from Michelle Highman.
Others on the panel were clearly nervous about the word “sales” and I don’t blame them. We hear nothing of successful selling -only of miss-selling.
But what the Social Market Foundation were calling for was improved pension advice and guidance and I can see no other way of making advice and guidance more effective than through the sales process. Which is why the FCA have got it right.
The consumer perspective
While I’ve been thinking about the sales of guidance by MaPS and the private sector, Martin Lewis’ Tik Tok on the need for people to opt-in or not opt-out of auto-enrolment has been gathering views.
@martinlewismse Employee aged 16 to 74 earning over £6,240/yr? How to ensure you don’t give away a hidden payrise! From #ITVMartinLewisMoneyShow ♬ original sound – Martin Lewis
Now over 350,000 views in a couple of days. All the tabloids are reporting on this video and the TV program from which it is cut.
The strong nudges which Martin Lewis is putting out are selling auto-enrolment to a constituency who are not going to Pension Wise for whatever reason. It remains to be seen if Martin will be even more ambitious and start talking about how people can spend their pension savings.
Why is Lewis so popular? I will say it again, because he doesn’t take backhanders and tells us what he is selling in a straight-forward way. So people trust him , listen to him and subscribe to his services. He sells his influence to ITV who pay him, his production company is delivering the FCA Guided Sales Model though the pricing model is measured in eyeballs.
By contrast, the public do not understand what MaPS is doing because MaPS is unclear about what it is selling.
Without clear guidance when you need it the most, it can be hard to see the best way forward. Leaving you feeling a little lost.
But when it comes to using your pension pot, guidance is on hand; impartial guidance, from Pension Wise.
In just an hour, get clarity on all your options.
Book a free appointment today and discover the power of an hour with Pension Wise, a service from MoneyHelper.
Look closely and you will see this advert is not just from Pension Wise but from HM Government. The central message is that we “get clarity” and that the service offers free impartial guidance. It is consistent with the 2015 offer
But people aren’t buying “free” . There is a fixed cost to Pension Wise which feeds through to the cost per meeting and if meetings are below target, the cost per meeting is above target.
Pension Wise continues to run at around 14% of full capacity, reaching only one in seven of the people it is aimed for. As Nigel Mills said at yesterday’s event, this is far from the universal service that was expected when it was launched.
People distrust “free” when they know that the service has a cost, they know that someone is paying for it and unlike Martin Lewis , who is very clear about his paymasters, Pension Wise is not coming clean.
Nor is it coming clean about that word “independent”, because people can see that this service is being promoted by the Government to justify Government. How can Pension Wise offer an independent service in the way that Martin Lewis does when it appears to the public as an advert?
People are nervous about the encroachment of the state into their private finances, they pay tax and national insurance , get pensions and universal credit and they even have a Government sponsored pension savings scheme in Nest.
Some people are also nervous about interactions on the phone, Zoom and face to face. Increasingly people are keeping their distance from real time interaction, preferring digital communications.
So – and this is really hard for people at the top to understand – they would rather not get Pension Wise guidance from Government. They’d rather be sold to by Martin Lewis thank you!
The tough truths about pensions
Most people know that retiring is financially tricky, whether your issues are to do with tax allowances or pension credits, not much is simple. But worse, people feel guilty that they aren’t or haven’t been saving hard enough, a feeling drummed into them by the savings industry.
They are looking for clarity, but not to be soft-soaped into complacency. They are distrustful of the state for intruding into their private finances and they don’t believe claims that Pension Wise is free. All of this is not clear – not giving clarity.
By focussing on the facts, by allowing people to draw obvious conclusions by presenting those facts in a persuasive way, Lewis gives people strong guidance on what they can do.
He’s justified by results. Viewers on TV, views on social media, most of all – his ongoing influence that makes him valuable.
He talks about tough truths on pensions and people listen. The truth for most people is that pensions are from the state and are topped up by benefits, unless they have a defined benefit pension, they have a pension pot which is not a pension.
Pots are too small to make much of a difference right now. See this diagram.
In practice , the pension pot(s) are of little importance to savers who have only been auto-enrolled (the new 10m).
But this is not the message that the Government is promoting through Pension Wise. Here – the message is in the pink slice
The FCA are also talking about tough truths. They know that guidance costs money and they are openly discussing how it should be priced and who should pay for it.
This is directly in contrast to Pension Wise and its backers. I suspect that in this, as in much else, transparency is the best option.