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.
I would have thought that this article would have had more reaction. Since 1988 the number of IFAs has been decimated. To fill the void you have guidance at great expense. Are you happy with the results? The only distribution channel working on the pre 1988 model of sales is SJP and if that was not allowed then the current clients population would have less funds deferred to retirement
I must admit I am astounded that you seem to be so unsupportive – and indeed critical – of PensionWise. YEs, it was set up by the Government, but it is funded by the financial industry as a free service to help consumers and it does just that. The problem has been that it has not been promoted to people at least partly because so many in the industry want their customers to buy only the products that their existing pension company offers. The PensionWise service is hugely valued by those who use it. To help more people, we need to increase take-up, rather than abandoning this impartial guidance service in favour of a paid-for ‘helpline’ from providers who are selling their own products. The Government’s interest in PensionWise is to make sure that people have an understanding of the risks of taking money out too soon, the options open to them across the whole market and how to assess what their pension position is. Any provider of guidance who is offering a service will be seeking to promote its own interests. The Government does not have financial interests in guidance, it has already given huge amounts of tax relief to each person’s pension and there is, therefore, a clear taxpayer interest in helping people make the best decisions they can. Obviously, the ideal would be for everyone to have impartial and independent financial advisers to work with them to find out the best way forward (which in their 50s will usually be to do nothing right now and let their funds accrue inside the pension wrapper, rather than going into drawdown too soon). Could a ‘paid-for’ guidance service really be relied on to tell people not to do anything, which would mean they are not receiving any return for their investment and risk of running the guidance service. The way forward that is best for the public, in my view, is to seriously improve PensionWise take-up, via some kind of auto-enrolment before they take money out of their pensions. The industry has so far resisted this, for understandable reasons, but if we care about helping people then let’s promote the benefits of PensionWise and help it reach a much wider audience. It is not funded by the Government and I struggle to see what conflict of interest there is for the customer with PensionWise, but such conflicts of interest would be pretty clear with providers offering this. Martin Lewis is brilliant and I hope people listen to his clear messaging. Pensions need a proper promotion campaign, like the ‘five a day’ for fruit and veg – they are good for you!
Agree *but* allow Pension Wise to give personalised ‘enhanced guidance’. Actual numbers and consequences will make the session useful rather than, as it can be now, vaguely platitudinous.
I totally agree with your view that it would be beneficial to widen the scope of Pensionwise. To do this requires the regulatory authorities and DWP to allow it to happen. And it needs flexible thinking from both FCA and DWP, something which they have not shown willing to do in the past 40 years.
Ros, I’d be supportive of a Pension Wise that tried a bit harder. Right now it is everyone’s friend with 94% of users saying that they’d recommend it, but as public money pours in to advertise it , it is stuck at 14% usage. My worry is that it is being used by people (like you and me) who validate what they already know and is not being used by the people who have no idea what to do. They are much more interested in being told things by Martin Lewis (the good guy) and others (who may not be quite so good). In nearly 40 years advising and guiding people, I know that you good influencers are salespeople, we need a Sales guidance Model in place.
Henry, and Ros too actually, are you aware that there are many additional services provided by Moneyhelper Pensions other than Pension Wise? The Pension Wise appointment is as described by Ros, and I happen to agree with Gareth Morgan that it would be more useful to people if something in between pure guidance and advice could be offered (see my reply to Gareth above). However Money helper also offers a truly excellent Pension help line, available free of charge 9 to 5 Monday to Friday and no appointment necessary. More people use this helpline than have Pension Wise appointments each year, and people can get personalised guidance. These phone sessions are not just call centre “how can I help you” sessions, sometimes they can last for over an hour and really provide exceptionally valuable guidance about budgeting, planning for the future, how to compare pensions when deciding whether to transfer or not, access to pension calculators to help people work out how much they need to pay and get them thinking about when they want to retire and how much they want, explanation of what is involved in considering whether to retain or transfer defined benefit schemes. There are also specialist appointments helping business owners think about pensions when running their own business (Mid Life Reviews), Pension Safeguarding appointments to help people consider the risks of scams (just introduced with new legislation on 1st December 2021), Pension in Divorce appointments which help people going through a divorce understand how to think about pensions when arranging and agreeing financial settlements. There are also appointments to help people who have lost their pensions to a scam to rebuild their pensions. In addition to this Moneyhelper deliver a large number of outreach events where in some cases literally hundreds of people at a time can benefit from the genuine talent and expertise of Moneyhelper pension experts. So I think you are not seeing Pension wise in context of the many other services and information and guidance available elsewhere in Moneyhelper. That is not to say I disagree about the need to alter more than just the standard Pensionwise service. And I totally agree that 94% satisfaction with the 14% who use it does not justify retaining the appointment in its current format. The key figure is to get more of the 86% who don’t use get involved. However, let us not forget the phrase, “you can bring a horse to water but you cannot make it drink” ie. many millions of people do not give a monkeys about the future and won’t ever care enough to change.
Brian, I think you are talking about the old TPAS service which I have always liked and praised on this blog. This represents all that is good about pensions support. I don’t agree with your comment about people “not giving a monkeys about the future”. People feel they pay taxes, including auto-enrolment (which most see as a pension tax) so that their future is taken care of. Why should they have to “engage” with pensions?
Further to which – I will use Paul Lewis’ recent blog on “signposting advice” to show how MaPS is currently filling a hole where nobody goes.
“The Money and Pensions Service (Maps) is supposed to fill this advice gap.
I like Maps. I really do. But I hate the torture it inflicts on language. Recently it held a conference for ‘money guiders’. Who? They are not the people who help eight-year-old Beavers and Cubs win the right for their Mum to sew the new Money Skills Activity badge by their woggle. No. These ‘guiders’ help adults with their money — investing, pensions, saving, benefits, annuities, tax, and so on. Sometimes they even give ‘signposting’. Signposting?
When it comes to neologisms like that, I am the Académie Anglaise. In nearly 40 years of financial journalism, no one has ever asked me to ‘signpost’ or indeed ‘guide’ them about their money. They want me to advise them.
But that is the one thing the £157.4m-a-year (2020/21) Maps cannot do. Advice is the province of regulated financial advisers. And for anyone else to claim to give ‘financial advice’ — even if it was advice about your finances — would insult their professionalism and years of training.
As this part of Maps is largely funded by a levy on financial advisers and banks, it has been decided that Maps gives ‘financial guidance’ or occasionally ‘signposting’ — or, now on its third branding in five years, ‘money helping’ — but never advice.
There are many things people need advice on that are not typically tackled by regulated financial advisers. Don’t go to them for advice about tax allowances or universal credit. Don’t go to them for advice about managing your credit cards or how best to pay in foreign currency. Don’t go to them about your consumer rights when you Buy Now, Pay Later. All this advice is generally (there are notable exceptions) beyond the ‘skillset’ of regulated financial advisers.
It has been decided that Maps gives ‘financial guidance’ or occasionally ‘signposting’ or ‘money helping’ — but never advice
Worst of all, don’t go to them when you want to know if you should cash in your final salary pension scheme. Since contingent charging was banned, it has been difficult to find a regulated adviser to give advice on that. So you are thrown back to the Maps guiders and signposters for, ahem, advice.
That is the real advice gap: the ban on the phrase ‘financial advice’ for the majority of the population who do not have investable assets of £50,000 but still have important questions about their finances, for which they need advice.
I suspect that the FCA’s idea of guidance and Paul’s idea of advice are pretty much the same thing.
For Paul’s wishes to be true then the regulator needs to change how it regulates people who could potentially sit halfway between full advice and guidance. The DWP and FCA control the environment in which Moneyhelper exists, so Moneyhelper cannot unilaterally decide that they are going to offer this kind of “guided advice” or whatever you want to call it. I have been saying for years that the regulator and DWP have created a very large number of unintended but highly negative consequences because of the way they have tried (in good faith I know) to protect the consumer. In spite of many good things and many positive changes the regulators have enabled, they have also failed to be mentally agile enough to foresee the problems created by their set of rules, laws and guidelines which advisers and guiders are expected to negotiate.
If you are calling out on the State’s capacity to provide a centralised source of guidance which is universally relied on, I totally agree with you. It is madness to suppose you can give people freedom to do what they like with their money and then tell them what to do with their money. People can and should be allowed to choose for themselves but they should also be allowed to choose “auto” and have choices made for them. This happens in pension saving and can happen in pension spending too.
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The old TPAS service is still very much alive and well. You mention why should people have to engage with their pensions. Well, they do not have to, but if they don’t then this lack of engagement leads to where we are today. Namely, people with tiny little pots who in reality have no choice. It actually does not really matter which of the 5 options you choose to take with your pot if your pot isn’t big enough to piss in. There is a very large minority (in millions) who either opt out of pensions or who, having no employer, simply do not set up a pension for themself. So in many ways one of the reasons that so few people take up either free guidance or regulated advice is that it actually makes very little difference which option they take because they have saved up so little. Paid for advice would be a waste of money because the cost of advice would be such a large percentage of the total pot as to negate any value in taking it. I also think that there is little appetite for companies to offer paid for guided sales/enhanced guidance. There are two problems with such a service for potential providers. 1) How do you attract indifferent people to such services in the first place and 2) how do you retain their interest by keeping the fees sufficiently low for their purse and at the same time make profits? Robo advice is not attractive to the people currently failing to plan for their future, and such people really need the skill of sales people to motivate them to take out pensions. But that kind of service and delivery requires skilled salespeople and such people sadly tend to plough their furrows in the richer fields of high net worth clients. I think you are aware I have strong reservations about the way in which Pension wise is structured as an appointment. But sadly it is very difficult to change the appointment content because the true control of the appointment content is with the DWP and FCA and most definitely not Moneyhelper. And whenever ideas are put forward to widen the scope and depth of guidance as presented by Moneyhelper, they get neutered by the FCA and DWP. However, if you know what you are doing, you can still deliver much more than just the current Pensionwise content in a way that helps the customer far more than rehashing the 6 options in the Pensionwise document. In many ways the real social issue is not whether customers should buy annuities, CDC default age wages, drawdown or cash it in and buy a ford fiesta ( not usually enough for a ferrari for most people Steve!). The real debate is about much earlier in life helping people understand the very basics of financial planning, namely budgeting, saving, investing and planning. And of course earning more by working hard. If more people were financially literate they would WANT to be engaged with pensions, ISAs, premium bonds, shares, building society accounts etc. I think the real gap is not at the point we near retirment, it is more at the start of someones working life where they would benefit from a free financial planning appointment or series of appointments teaching them how to pay for their current bills and save for the future.
OPAS and TPAS were great. Impossible to scale up but had a valuable niche. Shame now that they are being deliberately dumbed down by MaPS. RIP
The services are not being dumbed down Mr Tibbs, The Moneyhelper Pensions helpline offers exactly the sort of help that OPAS and TPAS did, but is now populated by paid professionals rather than the old volunteer based service. The helpline provides tailored guidance and answers to questions on pretty much any subject to do with pensions in the UK, whether they be to do with personal, occpuational or state pensions. There are also a wide range of other appointments for those seeking more detailed help on pensions in divorce, protecting from scams, mid life review planning and pension rebuilding appointments. People on here comment about things without knowing what is actually available and how it works. One of the frustrations is that sometimes it would be good to be able to tell people what to do, but that is simply not possible in the current regulatory environment, So that shortcoming is not down to dumbing down it is down to regulation.
The merger with MaPS is causing dumbing down. The name change decimated public visibility, the new website is woeful. MaPS are uncomfortable with the range of guidance given, MaPS has little idea of the jewel they inherited. The volunteers were ex-professionals with great experience. My understanding is that it is no longer a happy place…