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Don&#39t sweep supermarkets under carpet

IFAs may to tempted to dismiss the launch of pension supermarkets as a non-event. The feeling is that although consumers may venture on to the internet to find a pension, the vast array of information they will encounter is likely to push them straight back into the arms of an IFA. Yet it is important not to dismiss how IFAs could turn pension supermarkets to their advantage or the threats they could hold.

At least two companies are setting up online supermarkets to sell stakeholder and individual pensions. Charcol Online and Hargreaves Lansdown Pensions Direct are likely to be followed by several others considering the move, including Fidelity and Virgin.

There are several types of supermarket emerging. Some focus on the direct market, others are designed to support the IFA, while some serve both markets.

Bradford & Bingley is planning to set up a direct pension supermarket that will operate as a web-based equivalent to its traditional IFA business. CharcolOnline managing director Toby Strauss says: “People are self-confident and tenacious and do not necessarily want advice in the traditional way. There are people who do not have the time or the inclination to come in and see an adviser – they want to choose something á la carte.”

Strauss says having a web presence will allow customers to choose how they want to operate and B&B will have the means to follow customers wherever they want to go.

Hargreaves Lansdown Pensions Direct is using discounted prices to lead the confident consumer straight to its door. It says its site enables consumers to compare the prices of 30 providers.

It operates a collective buying service where all pension registrations are brokered to providers as a group deal. Head of e-commerce Mark Rowlands says this gives economies of scale for deals that are usually available only to big companies.

Rather than giving advice, the site provides access to a product database. Consumers can compare features, terms and the performance of different pensions as well as search for specific companies or pension facts. It also provides basic information about pensions including a link to the DSS website and looks at other methods of retirement planning.

But Rowland says the firm does not want to force people to do business over the internet and, if a customer wants independent advice, they can be put in touch with its IFA arm.

Although the site was not built for IFA use, Rowland admits its bulk-buying ability has brought interest from IFAs. He says: “IFAs have seen they can get a better deal for their customers purely from the economies of scale we are getting.”

Supermarkets designed specifically for IFAs work on the assumption that advice has already been given and the IFA is seeking to simplify back-office red tape. These sites are moving towards online quotations and the possibility of online applications.

Skandia Group pension brand manager Peter Jordan says IFAs already have access to online valuations and fund switching but Skandia wants to give IFAs more control of administration and clients more access to the funds once the pension has been set up.

As a time-saving exercise, personalised application forms which just require a client&#39s signature should be a boon for IFAs. Jordon says Skandia wants to reach the point where the system will bypass all existing infrastructure and the IFA will not need to talk to any support staff. Clients will be able to log on to their account using a password to get instant valuations of their plan rather than having to go through an IFA and fill out paperwork.

Yet there is concern in the industry that clients might be given too much freedom to access their own accounts.IFA Holden Meehan director Amanda Davidson hopes her clients would continue to ask for advice about their pension funds. She says: “When you are setting up a strategy for the client, you know where you are expecting it to go. Clients must be directed back to the IFA before making decisions.”

Although IFAs are not expecting their market to be affected significantly by these supermarkets, it is acknowledged they could provide a useful service for the middle- to lower-income market who may be reluctant to fork out a fee for advice. Buying a stakeholder pension through a supermarket could provide a welcome and cheaper solution.

IFAs should be wary of dismissing pension supermarkets too quickly. They might not lose many clients but clients will want to take more control. Websites are giving consumers more control and it is unlikely everyone will be able to resist the lure of playing financial adviser. But remember who will have to pick up the pieces.


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Case study: administration — managing group life schemes

Our client leads the global market in high-tech electronics manufacturing and digital media. The trustees of the company’s final salary pension scheme insure death-in-service lump sum and dependants’ pension death benefits for active employees, as well as dependants’ pension benefits for deferred members (those who have left service).


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