The impact of stakeholder reminds me of the ripple effect when a pebble is thrown into water – far reaching and continuously changing.
For employers, the issues to be addressed will depending on whether they already have a benefits package.
Given the complexity surrounding pension decisions, advisers could be excused for rubbing their hands with glee at the business opportunities this would normally throw up.
But for some advisers, the tighter market margins around pension advice in the wake of stakeholder are making them rethink their business options.
Smaller advisers who previously relied on a stream of indemnity commission t are the most affected. They are likely to be looking for additional business opportunities they may previously have ignored.
They could do worse than consider the wider range of employee benefits and the group risk options.
The premiums for risk benefits may be small fry compared with pension contributions but the wider employee benefits can be powerful. This applies particularly in terms of building and cementing relationships with clients and protecting the existing pension book – factors which become increasingly important as advisers look to minimise expenses.
Employee benefits can definitely punch above their weight. Apart from helping with staff recruitment and retention, a well devised benefits package can also help deliver cost-effective solutions on business issues, a factor which employers may not have fully appreciated.
By complementing the pension solution, advisers can increase customer depend-ency on their skills and advice – the “stickability” factor -an ideal situation for future business development.
One of the key resources within any business is the staff. Employers need to attract and retain people with the right skills. More and more businesses are looking to enhance and reshape the benefits packages they offer to increase staff loyalty – an ideal opportunity for advisers to demonstrate their added value. So how do advisers looking to expand in this area get started?
Stakeholder could well be the key. It will provide an ideal catalyst for employers to undertake a review of what they offer their staff. Advisers who are informed about the types of employee benefit solutions on offer are in an excellent position to capitalise on the business opportunities this will bring.
By tying in group life cover alongside GPP, for example, advisers can help resolve some of the issues the new tax changes will introduce for new members from April.
At the same time, their clients can benefit from group rates and group underwriting terms. The cost to the employer may be around 0.5 per cent of payroll but this will be offset by the full expenses relief the employer should receive.
Co-ordinating renewal dates will allow advisers to pick up one set of data from the employer, minimising admin costs.
Employee benefits do not stop at life cover. Cover against long-term disability, critical illness and life cover for spouses/partners can also be added to make an attractive benefits package which advi-sers can help tailor to meet an employer's business needs.
Small and medium-sized businesses are an increasingly valuable market for advisers. These employers face the same problems as big businesses but have a much smaller infrastructure and budget to address the issues.
With this size of business, a menu-based employee benefits package can work well, particularly for those with between 50 and 500 employees. It can bring big company benefits within the reach of smaller employers.
It fits in well within a stakeholder pension environment. The employer picks – from a range of menus of potential benefits – a menu for the workforce that fits within budget. Employees are then free to select their preferred benefit option from this menu.
Typical menus available might include mainstream benefit options such as life cover, income protection, critical illness and life cover for spouses and partners.
Although this will not allow a totally free choice of benefits, it will introduce an element of benefit flexibility in a cost-effective way, particularly where the use of internet technology is employed.
Employees can choose the option best for them at the outset and will usually be able to change to a different option as their lifestyle changes and protection needs vary.
Employee involvement in benefit choice should help improve their appreciation of the benefits being provided with a knock-on effect on staff motivation.
Those advisers who recognise the opportunities in this market can help their clients develop an employee benefits package which helps address not only stakeholder issues but also their business issues.
This will help advisers to lay the foundations for a long-term relationship with clients while supplementing their own income stream.