Special attention

February Retirement Strategy | By Lee Jones

The Retirement Adviser says a telling statistic - and one that illustrates the ethos of the company - is that 65 per cent of its clients take an enhanced annuity compared with the industry average of 13 per cent.

Head of financial planning Nick Flynn says: “The statistic is so high because we are asking the right questions and we know the market. We are getting under the skin of the issue, going the extra yard and finding out what is going on and getting people the best possible rate, not just the one that the computer spits out.”

Flynn, former head of retirement planning for Origen, was asked by the LEBC group in July 2008 to put together what he describes as a “complete pension service”, with advice at the heart. Including Flynn, the IFA now has seven advisers offering advice on all pension products.

He says: “The difference between advice and execution-only or self-select can be quite subtle but the difference in what the individual ends up with can be massive.

“If you put a set of pension rates in front of someone, they will pick the biggest one but that might be completely unsuitable for their requirements - going for a single life pension when you need a joint life pension, for example. If someone is not there to explain the definitions to people, it can be very difficult.”

The Retirement Adviser gets many of its clients from referrals. As well as teaming up with IFAs, the firm has recently reached a deal with Clydesdale and Yorkshire banks to deal with their pension business and hopes to team up with more small banks and building societies as they recognise the benefits of specialised pension IFAs.

Flynn says because pensions products are becoming ever more complex and the number of people needing pension advice will increase in the coming years, many IFAs will have to specialise as The Retirement Adviser does.

Flynn says: “It is becoming less likely that someone can offer you quality advice in each sector as opposed to a business that offers specialised areas.

“Most people who contact an adviser will now demand the best annuity deal - that has been ingrained over the last decade. We now need to be able to go that level further and pick up those who are not so financially aware and do just accept their provider’s annuity. The amount of people who just get that quote and sign on the dotted line is still huge.”

He also says that as more people seek out pension advice, The Retirement Adviser’s strategy of personalising its clients’ annuities will become the norm and will demand more specialised IFAs.

He says: “Postcodes and occupations are all very well and good but we need to know how much people drink, how much they weigh - we need everything you could possibly conceive. We then put that down and give that to the insurers.”

Flynn cites Partnership and Just Retirement as two providers that take on board the detailed fact-finding that his business does rather than adopting a “broad brush” mentality to annuity choice and says his clients get better pensions when more information is assimilated.

He says: “It is no secret that Partnership and Just Retirement are given a fair proportion of our business but that is because they offer many of our clients the best rates and the maximum amount of income and for annuities that’s what it’s all about. We are not that far from a personal annuity if things are done properly.”

The Retirement Adviser’s business is predominantly annuities but Flynn says the requirements of Solvency II may change that. He predicts that by forcing insurers to hold more capital, they may drop annuity rates by as much as 20 per cent and will drive clients towards alternative pension options.

He says: “The affects of Solvency II may push people towards other products like short-term annuities, fixed-term annuities, income-drawdown plans and third-way annuities. If annuities are reduced by 20 per cent, those products are going to look far more attractive.”

Flynn is confident that the pensions advice business will continue to grow in the UK, regardless of economic problems especially with the introduction of auto-enrolment in 2012.

“At the end of the day, the more people with defined contribution pots, then the bigger the market. Also, more people will be more interested in taking control of their own pension. But to gear up for the future, IFAs still have to understand peoples’ needs.”

He says part of this evolution will be in reassessing peoples’ attitude to retiring. People will be getting older and working longer and Flynn says specialist pension IFAs need to understand that now and to change their proposition accordingly.

He says: “People do not have the ’I’m retiring at 65’ blinkered approach anymore. Far more people are telling us that they want to stagger their retirement. It’s about getting to people earlier and getting them to take steps towards retirement, not a leap. I think that will become a lot more common as more financial pressures hit individuals.”

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