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Key Retirement scraps pensions advice arm

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Retirement income firm Key Retirement is to close its pensions advisory business because of lack of demand.

The equity release and annuity broking specialist began building a team of advisers to work with clients on their pensions options prior to the 2014 Budget.

However, it has decided to scrap the service – which employed seven people including three advisers – because people in its target market of pots between £50,000 and £100,000 were unwilling to pay for advice.

Key Retirement technical director Dean Mirfin says: “Our core target market are very much under-served in terms of access to advice. Fundamentally they are shying away from wanting to pay for advice, or simply do not see the need for it where they have clear goals.

“As a result we have made the decision to scale back the business and to retain a smaller non-advised team.

“With the Treasury and FCA work under the Financial Advice Market Review the landscape for these customers and how they access best outcomes is still changing but many are comfortable with a non-advised service where this is to achieve a guaranteed income from an annuity.

“However, many looking to drawdown are typically low or no risk meaning the economies of transacting for such clients do not work.”

Members of the advice team affected are currently under consultation and will be redeployed in other areas of the business if possible, Key Retirement says.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Got to say I am surprised By this.

    I am based in Lancashire only a few miles from Key and rarely find people unwilling to pay for advice especially in that target market. Demand is very steady with two new clients per week typical (bear in mind I’m a one man RI business). The initial advice fee (paid by the client) followed by an implementation fee (normally paid by the product provider) is the most common approach and works well.

    It is a shame given the advice gap that exists as the need for advice is only set to grow.

  2. The statement “many looking to drawdown are typically low or no risk” is telling and (as I see it) confirms my view that Income DrawDown is all too widely assumed to represent some sort of magical, virtually risk-free mechanism by which a quart can be extracted from a pint pot. It can’t.

  3. I don’t know why people thought that ‘pension freedoms’ changed the parameters for advice.

    What is worrying is that people who are ‘low risk’ see drawdown as a viable alternative to an annuity without paying for advice.

  4. So the conclusion is that people don’t want to pay for advice. And what exactly is happening with non-advised annuity sales. Yep, customers are paying for no advice but are unaware of it. The sooner commission is banned across the board, the easier it will become for clients to put a value on taking advice.

  5. Spot on Phil – only you’ve perhaps not gone far enough. From experience they are paying MORE for no advice than they would for advice; not only that – as you say – they are unaware that they are paying for this non-advice!

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