Chairing Pension PlayPen’s coffee morning today (12th April) is going to be interesting and fun. It will focus on guidance as a means to help people through the difficult choices at retirement and will feature Kevin Hollister, one of the leading advocates for the use of information as a means to make informed decisions.

We know the problems created by granting people freedom to choose how they wanted the retirement pot they’d saved paid out and when. We know the Government’s solutions -Take Advice, speak to Pension Wise and follow investment pathways. We know that the majority of people are not taking advice , not booking a meeting with Pension Wise and following their own- not the suggested – investment pathway.

There are two ways that people can address their retirement finances

1. Work out the resources they have and see how far they can stretch
2. Work out their cash flow requirements and plan for any shortfall.

Clearly (2) has the advantage of any plan – time. But many people run out of time and have to make the best of what they have (1).

To meet cash shortfalls, resources may have to be redeployed, sold or mortgaged – people often have to resort to equity release, down-sizing or selling family heirlooms to pay the bills. Many rely on inheritances. Some rely on state benefits and a few people find destitution at the end of their lives. Jesus’ remark that “the poor are always with us”, is as true today as it was when he reproved Judas.

While we cannot eliminate destitution, we can work to reduce it. Pension Credit is designed to ensure that those with little income and savings, have access to a minimum income guaranteed by the State. To date we have yet to find a guidance system that can encourage take up which remains around 70%. Just under one in three people eligible for free financial assistance of up to £3,000 pa, are not applying for it.

So the task of getting people to either plan ahead (s) or make the best of what they’ve got s frustrated by a failure on the buy side – people aren’t getting to the guidance or not following the guidance when they get there.

The challenge that Guiide and organisations like it, have is

1. getting to the people who need guidance and
2. getting people to follow the guidance.

In getting people to the guidance needed, the DWP is trying to guide people to claiming pension credit. However, the local newspapers they are promoting benefits to , aren’t showing much respect to the DWP

Change to benefits and pensions from today leaves everyone worse off

Herein one of the many problems guidance faces. People are highly distrustful both of Government and private guidance which they consider manipulative and sneaky.

There are better brands for delivering guidance – including Martin Lewis’ Money Saving Expert ,the Citizen’s Advice Bureaux, Age Concern, Age Partnership and other independently funded charities.

I have been asking myself what makes for successful guidance and the word “trust” is central.

When trust breaks down can it be rebuilt?

The Money and Pension Service (MaPS), has gone through several recent rebrands and is now marketing financial guidance under the MoneyHelper brand. Similarly, state benefits change their name over time in an attempt to get those using them to understand difficult concepts such as entitlements , rights and eligibility.

Many people are reluctant to share information with state run services as they do not trust Government not to use that information against them. In the most recent survey of reasons why people do not take up Pension Credit, the possibility of losing existing benefits was one of the top three reasons people gave for not claiming what they had a right to.

The importance of guidance from the private sector is that it is independent of the source of the funds that arrive as benefits. The Government can work with the private sector to achieve things that might not be achieved on its own.

The importance of private guidance

There is a move within Government to empower private guidance to get things done. The FCA has been circulating a model

We await to hear where this draft model will lead, but I hope that it will create a wider market for applied guidance that gets things done.

To me , the “key difference to current market practice” is the emphasis on “sales”. If guidance does not lead to people taking action , then guidance has done no good. This is a key message we have had from the FCA in our time in its Innovation Sandbox.

This means focussing on

1. getting to the people who need guidance and
2. getting people to follow the guidance.

The guidance sales process

Guidance is about problem solving. Whether the problem is solved through watching a youtube video or spending time with Guiide, the measure of success is “problem solved”.

This is why the FCA are right to talk of a “guided sales process”.

“Nudge” has been touted as an alternative to sales, but it is infact – the means to sales – it is the sales process.

But we are wary of sales processes which are not open about their aim. Guiide, like Pension Wise, is part of a sales process that leads to an investment solution. Currently Guiide leads to Penfold, Pension Bee, Open Money and Retirement Line for whom Guiide is an appointed representative. It is developing its own solution.

This is how Guiide becomes a sustainable and commercially effective sales operation.

Guided Sales could (and in my opinion should) become the way we move from an advice model focussed on wealth management, to a mass market guided sales model, where people

1. Work out the resources they have and see how far they can stretch
2. Work out their cash flow requirements and plan for any shortfall.