Threat or opportunity? How many times have advisers heard those words over the past few years? Now auto-enrolment is causing them to ask that question yet again.
Thousands of people will be introduced to pension saving and investment for the first time and their employers will have to meet a raft of new financial and regulatory demands.
To paraphrase Steve Bee, chief executive of Jargon Free Benefits, who spoke at the New Model Adviser® conference earlier this year, the incoming tidal wave of workplace pension scheme staging dates is nearing the shore, and it will affect each and every adviser in the country to some degree or another.
Allow time to prepare
In conjunction with our sister company, Whiting & Partners Chartered Accountants, we recently held a number of workshops for existing and prospective clients on the preparation for real-time accounting (another reform shaking the world of employee benefits) and auto-enrolment.
The most important thing I learnt from these presentations was the message I was trying to convey about the need to allow plenty of time to prepare.
We have a number of employer clients who will require our assistance with auto-enrolment, so we do not have any choice but to provide it. Some firms that operate solely with high-net-worth clients may want to turn their backs on auto-enrolment, but it may prove difficult to ignore altogether.
The challenge for us and our peers is to provide an affordable service to clients that is profitable to us as a business, but that does not become all-consuming and impact on our service delivery to our existing clients.
Matching providers with client needs
In designing our proposition, we have held a beauty parade of providers, considering everything from traditional life companies to the National Employment Savings Trust (Nest).
All employer clients will have slightly different requirements, but they could be categorised as those who wish to embrace workplace pensions and those who see it as an inconvenience at best and will do the bare minimum.
It seemed logical to start with identifying which providers would fit which category of employer and, more importantly, which would provide the most suitable administration services and systems.
In our case, the number of employees involved, came into play, and it was obvious at an early stage that the life company end of the spectrum does not want to be operating at the small-to-micro-employer level.
Auto-enrolment is almost certainly low-margin business so a technology-led, streamlined approach is the only way to make it work.
Disappointingly, at this stage, Nest’s offering does not appear to be particularly adviser-friendly. Maybe this will evolve as the number of smaller employers hitting their staging dates increases because they are the more likely to require adviser assistance.
Work in progress
Although we have yet to fully determine our proposition, it is likely to be flow chart driven to enable existing and prospective clients to readily identify the most suitable path they need to take prior to deciding if they will require our assistance, which ultimately will be chargeable.
We will then determine those that will require ongoing assistance as opposed to those that will require a one-off transactional service, which is charged by a flat fee.
Significant opportunities will present themselves and the role of my firm may change as a result. What must not, and will not, change is the high level of personal service we provide to individual personal clients whose advice needs will remain at the core of everything we do.
Other firms may choose not to play in the auto-enrolment arena. To what degree they can avoid it remains to be seen.
David Salmon is managing director of Whiting & Partners Wealth Management