There has been much debate about the economics of selling pensions and stakeholder has had an impact across the product range.
An area that I think is of equal, if not greater, importance to IFAs is the ongoing advice needed after the initial purchase of a pension policy by their clients – the emphasis being on advising rather than selling. With the introduction of lower-margin products and multi-ties, there is no doubt that IFAs are going to have to think long and hard about their strategies, especially for pensions.
They have to reduce their costs if they want to continue in the pension market and there is no doubt that technology can help them do this.
Employers of five or more staff have to at least nominate a stakeholder scheme by October 8. This is another big opportunity for IFAs to provide advice, either in the workplace or via affinity groups, although with a different approach that requires the use of technology in order to be cost-effective.
Most people have come to accept this new approach as the way the market is moving. However, the retirement planning market is not just about selling pensions. It is also about advising clients on their existing pension arrangements and what to do with their pension pot when the time comes for them to retire.
Income drawdown, transfer value analysis, switching into a stakeholder scheme and whether or not to contract out of the state pension scheme are all issues that need specialist advice. Within the current market dynamics, these are perhaps some of the most lucrative areas for IFAs and are certainly where clients need professional advice. However, the ever increasing complexity of regulations and the fear of retrospective reviews of past business is hampering the effective and speedy completion of new business in these areas.
Many IFAs are not yet authorised or confident to transact this kind of business without additional support. This is where technology can come to their aid. Without having to attend complex training courses and gear themselves up for the G60 exams, IFAs will be able to advise their clients on these complex issues.
Unless properly authorised, when their involvement would be their time, IFAs would currently expect to spend at least £500 to have an actuary produce a report on whether it is worth their client proceeding with certain courses of action such as income drawdown or pension transfer.
We are currently assembling a set of e-commerce tools that will enable IFAs, regardless of their level of authorisation, to ascertain whether their client should be considering these retirement options.
If the analysis tools identify an appropriate course of action and the IFA is not authorised, they can still benefit from a split-commission arrangement by referring their client to an adviser with the relevant qualifications to conduct the business.
IFAs should refocus their pension strategies on these areas, offsetting the consequences of low-margin products and the threat of multi-tied sales. In some cases, this refocus will be imposed on IFAs. For example, they will be legally required to review all their client's existing pension policies against stakeholder schemes. IFAs should think differently and use technology to ensure they can service client needs in the more complex areas of retirement planning.
By streamlining and automating certain needs analysis processes with suitable software at an affordable price, IFAs can feel confident about providing advice and writing more business within these and other specialist areas of retirement planning.