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How to build an auto-enrolment advice firm from scratch

Manse Corporate is the brand new workplace advice arm of IFA firm Manse Capital. Adam Yates joined Manse Corporate from Aviva to head up the workplace advice business, building up a proposition from scratch. Here's how they did it. 

Manse Capital goes Corporate

My business, Manse Corporate, is the brand new workplace advice arm of IFA firm Manse Capital. I joined Manse from Aviva to head up the workplace advice business and we have been able to build a proposition from scratch that will enable us to work with up to 2,000 small business over the coming years as auto-enrolment continues to be rolled out.

The corporate pensions landscape is rapidly developing. Auto-enrolment has created a huge influx of companies to the group pensions market, which is the first time for most.

However, the legislation and regulation governing auto-enrolment is overly complex, with stiff penalties for those in breach. This has left employers urgently searching for support, and the demand will overwhelm the increasingly limited supply of suitable advice because the retail distribution review (RDR) has led many advisers to exit the market.

Manse Capital goes Corporate

My business, Manse Corporate, is the brand new workplace advice arm of IFA firm Manse Capital. I joined Manse from Aviva to head up the workplace advice business and we have been able to build a proposition from scratch that will enable us to work with up to 2,000 small business over the coming years as auto-enrolment continues to be rolled out.

The corporate pensions landscape is rapidly developing. Auto-enrolment has created a huge influx of companies to the group pensions market, which is the first time for most.

However, the legislation and regulation governing auto-enrolment is overly complex, with stiff penalties for those in breach. This has left employers urgently searching for support, and the demand will overwhelm the increasingly limited supply of suitable advice because the retail distribution review (RDR) has led many advisers to exit the market.

Advice to do what it says on the tin

Of the advisers that remain in the market, many are sceptical about the commerciality of auto-enrolment advice. Yet having an advice strategy that can deliver a digestible solution can generate many new corporate clients.

Judging from client feedback, employers want a ‘no-nonsense’ approach. That is not just the case in Yorkshire, where we are based, because clients from across the country have been equally receptive.

Before my current role, I was pensions development manager at Aviva, where I focused on the opportunity created by the 2008 Pensions Bill, which enshrined auto-enrolment in law, and the inevitable collision of that reform with the RDR.

Between Aviva and Manse, I spent 18 months at employee benefits consultants Prosperis, guiding several large clients through to their staging dates, and it was eye-opening. Without exception, they had not understood how to comply or implement their auto-enrolment schemes, their payroll software was inadequate and they were under-resourced in this area.

Early inroads

However, I was fortunate enough to meet five directors of Manse Capital, which had been RDR-ready for 10 years. They had the foresight to foster relationships and introducer agreements with a range of commercial brokers and professional connections, which would deal with business owners and the corporate world.

The commercial brokers were particularly quick to identify the client risk of non-compliance, and saw auto-enrolment as an opportunity to retain and grow their client base, and gain the kudos of helping their clients overcome the risk management challenges presented by workplace pension reform.

What employers want

Any advice business considering going down the corporate route will face some tricky questions, especially with the market evolving at a rapid pace.

Less than 20% of UK employers have contributory pension schemes, according to the Office for National Statistics. This minority may be receptive to the benefits of well-funded schemes and some of the benefit solutions available, but the competition for advice is fierce.

The 80% with no pension scheme (ignoring stakeholder shells) provides fertile opportunities.

Those companies’ reaction to auto-enrolment is remarkably similar across the board. They generally say: ‘Help me comply, keep costs to a minimum, and make sure my staff get a fair deal.’

Most employers warmly welcome a straight story and will pay a fee to outsource these issues. This can offer an adviser a fast track to the boardroom table. Additional advice opportunities, such as key-man assurance and advising on director pensions, quickly arise.

Software requirements

Most clients prefer to phase in contributions and use band earnings to set their and their employees’ contributions at reduced initial levels. This requires software for making calculations and record-keeping. If there is an existing scheme, this will almost certainly need an overhaul to meet the rules imposed by auto-enrolment.

The National Employments Savings Trust (Nest) has to accept any auto-enrolment scheme and should be the obvious provider for most small employers, but it does not assist with a software solution.

Of the established providers, Scottish Widows, Aegon and Scottish Life have built the necessary software, but are choosy about their target clients. The super-trust schemes, such as NOW Pensions, provide an attractive alternative.

Clear fee structure

Arriving at a clear fee structure is difficult because the needs of employers vary. Consultancy charging, although now banned, was never attractive because it created a trust barrier. A clear employer fee is the most viable option.

We charge an initial fee charge for technical guidance, provider selection and scheme implementation, based on employer size and case complexity.

We take six months to staging date as the benchmark timescale and will increase fees if the timescale is less, but also reduce fees for early commitment. This helps resource planning.

We also offer governance and ongoing support, including setting up a pension committee. The ongoing fee is 50% of the initial fee.

We took a strategic decision not to offer advice for enrolled members, and stick with provider default funds for scheme investment, except where access to Sharia-compliant funds is appropriate. We have not found any appetite to pay for additional investment services.

Provider capacity crunch

Provider capacity and appetite to accept schemes, particularly low contributions, is a real concern and recent media coverage of the ‘capacity crunch’ is completely valid.

Some employers have recognised this and are willing to start early, which we would not have predicted six months ago.

Nest may end up being the last man standing, and new software solutions may lead clients to its door.

There are some terrific innovators of stand-alone software, the so-called middleware. Staffcare has been the pioneer. Steve Bee’s Jargonfree Benefits uses this technology and it does what it says on the tin.

The Aviva AME system, an auto-enrolment compliance tool, is attracting distributors. It was built with good capacity and can be white-labelled for advisers.

These emerging systems will need to gain traction and prove themselves to be robust in terms of providing compliance. If they prove to be as good as they look, they too may reach capacity. It will be interesting to see how investing in licences will become a judgment call for advisers as demand takes off.

We are delighted to be in this growth market because it is great fun to work with employers whose can-do attitude is infectious, and we look forward to the next couple of years with relish and excitement.

Manse Corporate’s auto-enrolment proposition

What are your charges?

Early booking discount: 50% deposit of implementation costs (we are contracted to the client and put the scheme in place; the work starts six months from the staging date, which is when they pay the balance).

Scheme recommendation and implementation: £7,000-£10,000

Ongoing: 50% of implementation cost, taken annually until the employer terminates our relationship. A full review of their arrangements at a later time will be on the same basis.

Do your charges increase closer to the staging date?

We increase charges if we are less than six months to the staging date and decrease charges if the employer comes to us more than six months before staging date.

Do you offer any non-pension products as part of an employees benefit package?

Yes, group protection and key person insurance.

Do you offer advice to individual employees?

No, it creates too many problems. For example, if we are unable to hold a seminar for the whole workforce, such as night shift workers, the employer could be seen to have treated people unequally.

How many auto-enrolment employer clients do you have?

Over the next 12 months, we will reach 100.

What is the average membership of the schemes you advise on?

It is 100 to 300 members, in line with the size of employers currently being staged.

Adam Yates is managing director of Manse Corporate

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