We used to be in the financial products industry, but since the turn of this year we’re now in the financial services industry. One day soon the things we’ve called financial products for so long will be about as relevant to people’s lives as floppy disks are to today’s iPad users.
The distribution of products is one thing but the provision of valuable and valued services quite another. Financial advice is a good example of a valuable and valued service, and something far too few individuals these days are able to benefit from.
I agree with those who say that we don’t have anywhere near enough qualified financial advisers in the UK. However I don’t think those advisers we do have should spend all their time advising individuals.
These days there are other important services advisers can provide, particularly in the workplace. With the new pension reforms requiring employers to provide a workplace pension scheme for their employees and, crucially, to establish processes and practices to ensure compliance, there is much assistance advisers can give over and above the mere provision of a suitable pension scheme.
A new landscape
In five years’ time our corporate pension landscape in the UK will have been completely transformed by the momentous effects wrought by the introduction of auto-enrolment. Before October 2012 only a small number of large employers formed what we used to call the corporate pensions and benefits marketplace. They employ about half the UK workforce.
After 2018 practically all UK employers will be part of the new corporate pension marketplace as more than a million new workplace pension schemes are put in place by this ground-breaking legislation. Those smaller employers between them employ half of the UK workforce, who have so far been excluded from the pensions and benefits the other half have long taken for granted.
A golden opportunity
Many IFA businesses too will be transformed by these events and the opportunity to help employers and their employees take their first steps in this new corporate pensions and benefits world.
The vast majority of the employers affected by auto-enrolment are small to medium-sized enterprises and smaller micro-firms. All the research points to the fact that the first port of call for employers as their staging dates loom will be financial advisers or accountants.
When I say this, the most common response is: ‘I didn’t spend the last few years doing all these exams so I could help employers with their admin.’ I know advisers say this, but I don’t agree with it.
Facilitators not administrators
I’m not saying advisers should be responsible for taking on the administration work for an employer. That work is both onerous and quite tricky; and, being based on pension legislation, it is also more likely than not to change constantly. I don’t think employers or advisers will ever be able to keep up with managing an employer’s auto-enrolment duties without the assistance of a system designed for the purpose.
Advisers can facilitate access to that system. An adviser firm of the future could easily have a good number of small corporate clients where the employers are using third party systems to take away the headache of auto-enrolment and maybe even manage their range of workplace benefits.
There will be a pension – the law says there must be – but employees these days want other workplace benefits too, such as childcare vouchers, dental plans, cash plans and so on. Better still, they can be provided by a system that can do so through salary exchange. It would not only provide the employer with valuable and practical help, it could also be used by advisers to engage with employees.
We’re in a different world, but it’s not one in which advisers have to do admin; it’s one in which they have a chance to provide services they may never have thought of before to more clients than they ever thought they could reach.
Steve Bee is chief executive of Jargonfree Benefits