I went to the cinema at the weekend to see 13 Days, which is based on the Cuban missile crisis. It demonstrated how cool leadership saw us through when many around John F Kennedy were losing their heads and urging action which might have proved disastrous.
Funny how the mind works but it led me to reflect how the financial services world reacted to Government proposals on stakeholder pensions with an enforced charging structure. It could not work. It would not work. It would drive IFAs out of business. The public would avoid taking advice.
Decision trees – don't make me laugh. With an attractive charging structure, they would be queuing up to buy the newstyle pensions. These are only a very small sample of some of the reactions.
So, here we are, three weeks into the new stakeholder world. With the relaxation of the polarisation rules, we might have expected crowds to have been forming outside banks. I have not spotted any so far. How has it been for you? No incessant phone calls from would-be purchasers? No crowds forming? Thought not.
Still, I am firmly in the camp that welcomes stakeholder.I believe the real issue is the drive to produce better value for money products for more people in the UK. The link with the Cuban missile crisis of 1962 is not as spurious as it might seem because, from an historical perspective, it really was the start of a new era and in financial services we have entered our own new era. We all know we need to drive down costs and grow significant business volumes but the most significant change is in the way that we market these products and how quickly we embrace electronic trading.
If the 1 per cent cap is considered the driver, then the accelerator is definitely e-business. What was once considered almost a peripheral activity is now placed at the kernel of pension business. Its focus is all about delivering real benefits to IFAs that give both providers and advisers the ability to compete in the 1 per cent environment through cost reductions that facilitate the growth of profitable business.
Although the mind may be willing, the body can often be weak when it comes to participating in the e-commerce era. Unless the desire to embrace such technology is real, advi-sers will be hard pressed to make a buck.
Research shows that more than three-quarters of the UK's small businesses do not provide staff pensions and that only one in five will have reviewed this situation by October. What this shows is that the opportunity to develop business certainly exists in the stakeholder era. However, across the industry, the typical intermediary business in the post-stakeholder environment may decide to offer a reduced advice package owing to pressures on profitability and it is probable that some may take on the role of introducers.
Support from providers will be required to fill the void and this is taking the form of phone enquiry support, access to interactive decision trees and the growth of employer/employee intranets.
How do we view the future? I believe that, in spite of all the challenges, stakeholder (whether or not it becomes compulsory) will be central to the financial well-being of many of the British population. For advisers, the stakeholder era of promotional efforts will focus on e-marketing and with its arrival the pension marketplace cannot but change.
As with the crisis over Cuba, we will look back and simply say “crisis – what crisis?” Stakeholder may yet prove to be the catalyst which transformed the way IFAs conduct business. Of course, on the other hand, Kennedy was dead within a year after Cuba.
John Cowan is group sales director at Scottish Amicable