The retail distribution review (RDR) will almost certainly result in a short-term contraction in adviser numbers as many customers baulk at paying directly for advice. While they may come around in the longer term, demand for financial advice will probably fall short of supply over the next few years.
Fortunately, the RDR is accompanied by the biggest ever change in private pension policy: auto-enrolment will create a demand for assistance on a scale never experienced before, leading many advisers to consider ‘going corporate’.
Employers’ legal responsibility
Auto-enrolment is complicated, yet employers, who are not experts, retain most of the legal responsibility for compliance with the rules.
They are the ones who must decide which employees to enrol, who they should not enrol, and to whom they must offer membership even if they are not eligible. Throw in band earnings, waiting periods, certification and a host of other issues, and it is immediately clear employers will not be able to cope on their own.
Considering the size of the fines and other legal action employers can face if they get this wrong, most will be prepared to pay hard cash to make the problem disappear.
Establishing the service offering
Advisers considering entry into this arena need first and foremost to set out their service offering.
Will you offer full advice to employees or a simple compliance service? Or perhaps guided self-help? What does your planned service achieve for the employer? Does the employer want to leverage some value for this extra spend? How will this be monitored, measured and reported back?
Having largely come from a regulated background, advisers may naturally think a similar advice process involving detailed fact-finding, analysis and recommendations should form the core of their service in this arena. This may suit some employers, but most are already being dragged kicking and screaming into the world of paying into their employees’ pensions.
And yet employers will not want to break the law. To assist advisers with compliance work, a number of providers have developed systems that use data extracted from employers’ payroll systems to sort employees into the right groupings.
Other key parts of the service offering may include rationalising existing arrangements, demonstrating value to employees, attempting to improve take-up rates or implementing wider employee benefits, such as life and health cover.
John Lawson is head of corporate benefits policy at Aviva.