Advice in the workplace
When presenting to trustees I always know when I have got their attention because I get a strange look when I ask; “Do you want your members to a second-class service”?
I go on to explain that if people contact me for help as they approach retirment because they may have seen my name in the papers on heard me on the radio ask one of the team will give them a personal service. This involves explaining all of their options and an offer to tailor our advice to their individual circumstances.
However, if the same person contacted their scheme or pension provider, they would probably find it difficult to get a personal service. They may be referred to a website or given a brochure to read on even an annuity calculator to use. Some people may even be referred to a helpline but will they get the right type of personal service?
Personal service comes in a number of different ways; scheme and pension providers can provide help and information whilst Pension Wise offers guidance – but in my experience, good as these personal touches are, they don’t tell people what they really want to hear.
Many people want to know what the right decisions are for their personal circumstances but help and guidance doesn’t go that far.
I am reminded of some filming with a famous broadcaster for a Channel 4 programme on pensions and annuities. Three times he asked the consultant at a well know insurance company for help and three times he was refused; ‘which option is best for me’, ‘do you think I am doing the right ‘ and ‘what do most people do’.
The consultant quite rightly said, ‘this is an execution only service and I can only give information’. To which the famous broadcaster replied; ‘I don’t want to be executed’.
Clearly there is a lot of difference between a before pension freedom conversation about annuities and more enlightened conversations today, but a Pension Wise consultant couldn’t answer the same questions today because it crosses the boundary between information and advice.
This means that if people want to know if they are making the right decisions they must speak to a financial adviser.
But we all know that most people think advice is both expensive and complex.
I disagree with this and can demonstrate why advice doesn’t have to be either expensive or complex.
I go one step further and say that converting a pension pot into cash and income is one of the most difficult financial decisions in personal finance and most people simply don’t have the knowledge to make the best decisions without advice.
It is easy to think that advice is only feasible for higher net worth clients and those with smaller funds can be dealt with through ‘robo advice’ or self-select annuity platforms. I take issue with this and have consistently argued that just because someone has a relatively small fund they should be treated as a second-hand citizen.
There is something strange here. By directing members to faceless robo advice or annuity calculators we are expecting those who may be less technology savvy to make important decisions without human input when they need more personal help than those who are more tech savvy.
The elephant in the room is cost. Whilst we would like everyone to get advice it seems the cost of advice outweighs the advantages. But this is misleading because I can show examples of some non-advice service are actually more expensive than advice.
Trustees are surprised to learn that non-advised annuities pay commission. Even though RDR ban commissions for regulated advisers and moved them to fees, it left no-advice firms still able to take commission.
In practical terms, someone arranging a £50,000 annuity with no advice will be charged £1,500 commission. I can give someone jolly good advice for £1,500.
So, schemes and pension providers should stop treating some members as second class citizens and look to advisers who may can make advice less expensive and less complex.