As advisers, we want to help people make the right decisions at retirement, but many people do not want to help themselves by properly engaging with us.
People used to be more open to taking advice and more trusting of experts but there seems to be a lot less of that now. This has not happened overnight, but the lack of engagement has been accelerated by events such as the RDR.
I am prompted to make these comments because I feel bruised by several difficult encounters recently with people who have approached me for advice but, for different reasons, have not understood how the process works. This has led to disappointment, as much on the client’s side as on mine.
I see three key areas of misunderstanding that account for the current lack of engagement.
The first is the idea that it is easy. One of the paradoxes of pension freedoms is that it has given people almost complete flexibility and a feeling they can make their own decisions, but behind it is a layer of complexity that very few can understand without expert advice.
The second is the value of experts. If it appears simple, why engage with experts? Especially if some experts are not all they are cracked up to be. It goes without saying that advisers are highly qualified and can truly call themselves experts and, more importantly, can ensure their clients get the best outcomes.
Finally, there is the question of cost. I am tackling this issue in my next guide for consumers, where I explain that the fee for advice is the cost incurred by the adviser firms, plus the value added.
The cost of running an adviser firm can be easily calculated, although it does not help clients that a significant element of those costs are regulatory fees. But how do you calculate value added?
Value added can be expressed in terms of better outcomes. Put simply, a pension pot with an advised investment strategy will probably meet the objectives better than a self-select investment strategy. Value added can also be expressed as avoiding making poor decisions that result in poor outcomes.
A modest fee for advice may pay dividends in terms of added value. If only more people would realise this.
William Burrows is retirement director at Better Retirement