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Educating IFA is landed with a tough teaching task

IFAs have an uphill struggle ahead of them on the long and winding road to stakeholder.

Once again, it appears it is down to advisers to clear the mess created by well meant but poorly executed Government initiatives.

Step forward stakeholder, a household name to you and I, but worryingly not to those who will be legally required to offer access to it – employers.

Not only do IFAs have to contend with the 1 per cent charging cap, reasons why not letters and mistrust on the part of employers who believe stakeholder is just a scheme devised by IFAs to generate more business – they are now charged with having to educate the general public as well. This is a job that the Government should devote substantial funds to but only currently aims to address through a one-off mailing starting this week by the Department of Social Security in conjunction with the Inland Revenue.

Recent research carried out by Taylor Nelson Sofres Finance, a marketing inf-ormation group, highlights a disturbing ignoranceof stakeholder among employers.

Half of all financial decision-makers in small businesses in England and Wales are unaware they will be legally bound to provide employees with access to a pension scheme from October 2001.

The planned Government stakeholder awareness-raising “campaign” consisting of a single information pack mailed out to 400,000 employers over the next couple of weeks is unlikely to have any real impact.

The money spent on the simultaneous mailing to the already savvy product providers would be better spent on educating the people who are not in the know – the target audience.

The DSS admits there is confusion about stakeholder among employers and the public but it points the finger in all directions but its own as the source of the confusion.

It believes its planned television marketing campaign, highlighting all the pension options open to people will clarify the situation and everything will be hunky dory by April. But the campaign is not due to be launched until “early next year”.

The DSS says people need to get information from official sources only but it seems happy to let confusion reign until the start of next year, when it will finally start to “dispel the myths” – perpetuated by the “unofficial” sources – through its ad campaign.

In the meantime, IFAs and their clients have to live in the real world. Although the first stakeholder payments cannot be made until next year, stakeholder business is already being written. The decisions are being made now.

A little knowledge is a dangerous thing. IFAs are coming across employers who turn them away at the door, thinking they will be better left to their own devices.

Intermediaries have been testing and examining the best ways of approaching the subject with employers and methods range from cold calling to the distribution of high quality brochures.

However, the general consensus is face-to-face meetings are the best way to discuss the matter with employers.

Response from employers has on the whole been positive. Yet IFAs are finding it disturbing that many employers have been totally unaware of the onset of stakeholder and the implications it will have on their business. In some areas, this lack of knowledge has accounted for half of the responses.

Employers do not seem to realise that stakeholder is merely a personal pension by another name and not the all singing and dancing product they perceive it to be.

As a result, IFAs are taking on the role of educator and many feel this is not their responsibility and should be taken care of by the Government.

This role, not unfamiliar to IFAs, puts them on some pretty shaky ground. Under normal circumstance the IFA is in possession of the full facts, but there are aspects of stakeholder the Government is yet to clarify.

On the whole, the IFA firms addressing stakeholder seem to be focusing their marketing campaign on contacting clients from their database.

The common strategy is sending out letters alerting employers of the implications of stakeholder and how it will affect them directly. They are requesting clients contact them directly for further information and creating individual plans that will guide clients through stakeholder implementation.

Businesses from professional backgrounds and with high-salaried employees are key targets it seems. The potential for lucrative business from these individuals is high and some firms have been lucky enough to have already picked up additional business on the back of these meetings.

However, it is the small businesses paying below average salaries, that are supposed to be the target for stakeholder, that are currently being neglected. IFAs cannot be blamed for this omission – it is not their responsibility and they will receive little benefit from promoting schemes to this sector.


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