View more on these topics

Experts warn of auto enrol advice gap for SMEs

FSA Front Door 480

Providers and advisers have warned the FSA that its stance on consultancy charging for automatic enrolment risks creating a damaging advice gap for small and medium sized businesses.

Under RDR rules, advisers who advise employers will be able to levy a consultancy charge for the work they carry out. This will be deducted from the pension pots of employees who join the company pension scheme.

The FSA is insisting that a consultancy charge does not reduce an individual’s total pension contribution below the auto-enrolment minimum of 8 per cent.

Aegon head of regulatory strategy Steven Cameron says: “Employers that are looking to do the bare minimum under auto-enrolment will now not consider seeking advice, because if they do they will have to pay separately for it.

“Advisers will therefore avoid approaching employers that they think will not be prepared to pay more than the auto-enrolment minimum because they know they will not be able to find a way of paying for the advice they provide. The FSA’s stance will open up an advice gap.”

Legal & General pensions strategy director Adrian Boulding says: “My concern is around the second quarter of 2014, because that is when we will get a bulge of around 30,000 employers with between 62 and 249 employees. This is exactly the size of employer that traditionally would have looked for an IFA funded by commission.

“If we arrive at a position where the consultancy charge is unworkable then these employers might not access financial advice.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “It is a disgrace that automatic enrolment has started and we still do not have absolute clarity on consultancy charging.

“It will take a huge amount of marketing skill to convince small and medium sized employers who are auto-enrolling at the minimum to pay a fee for advice.”


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. Yep, that’s right, you’re gradually getting the idea. Employers pay for advice on their contracts, health & safety, taxation and legal issues and yet they’re treated the financial adviser as someone they can get information out of ‘for free’. Too often, it’s been the adviser who has offered the ‘free’ option in the first place. As employers cannot give advice on AE then they will be forced to pay for the advice and then maybe they’ll start to value it

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm