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&#39Stakeholder charge cap creating advice vacuum&#39

The 1 per cent charge cap on stakeholder is leading to an advice vacuum, according to a report from Datamonitor.

The business information company argues that consumers are finding it difficult to access any source of advice on the schemes as providers and IFAs struggle to reconcile giving advice under low margins.

Datamonitor says within the 1 per cent cap, it is estimated that distribution costs make up around 55 per cent, admin costs 35 per cent and investment management costs 10 per cent, leaving little or no room for advice.

The report also says consumers who feel they need full face-to-face advice are likely to be steered towards decision trees and generic information packs but if they shop around they will be successful in getting advice.

The report was complied on the basis of interviews carried out throughout September with senior pension personnel at many leading stakeholder providers together with research from a sample of 1,000 consumers.

Financial services analyst Suzie Stokes says: “Neither providers nor IFAs are actively offering advice. This is creating an advice vacuum that needs to be filled. Providers need to decide if they they are going to offer customers a full-service approach or a low-cost stakeholder scheme.”

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