Levels of enthusiasm for the stakeholderlaunch differ depending on the level of the IFA's commitment to selling pensions, the amount of preparation already done and scepticism over the product itself.
IFAs are used to being told of the importance of being able to hit the ground running on April 6. Misys head of marketing Andrew Bedford says: “Since May last year, we have spent thousands of man hours preparing our members for the launch of stakeholder. It is a bit like waiting for the World Cup to start, only not quite as exciting.”
But now the waiting is virtually over and the industry is watching to see how effective the preparations were and what will need attention. Over the months preceding stakeholder, IFAs have been faced with the problems of technology and web-based admin.
The broad message is that computers are the key to making this low-paying product worthwhile. IFAs, networks and providers are all emphasising the importance of technology to the success of stakeholder. Bedford says: “The provider must offer the product on a web-enabled platform. Without this, it does not make financial sense.”
IFA Network managing director Nick Ansell believes the biggest problem is payment for advice when margins are so tight. He says: “IFAs are generally ready for stakeholder in terms of the ability to supply products. But the only way this product can be distributed is through electronic media.”
Previous experience with computer systems used in providing group pension schemes over the last two years is not only making the transition to stakeholder easier but also influencing which stakeholder pensions IFAs are recommending.
Positive Solutions chief executive David Harrison says: “Companies like Scottish Equitable and Scottish Life are well set up for stakeholder because it uses the same software and back-office admin as their group pension plan products.”
Providers fall into two camps when it comes to stakeholder admin. Bedford says: “Friends Provident is hoping IFAs will deal with the administrative set-up of stakeholder themselves, whereas companies such as Clerical Medical and Axa are throwing people at the problem and holding IFAs' hands through the first few transactions. I do not think they are being anti-technology, just realistic.”
Aside from technological matters, C&J Independent Financial Advisers partner Barrie Jeffery believes the main problem which faced IFAs in the final weeks before stakeholder's launch was deciding which products would last the pace.
Jeffery says: “It is difficult for IFAs to work out who will survive. Standard Life is saying it needs 20 per cent of market share to make any money. There are 34 authorised providers chasing the market. All the clearing banks are there trying to shoot their captive customers like fish in a barrel.
“But I cannot believe the high-street banks can make a profit any quicker than Standard Life, which says it will take 15 years, so will the banks' shareholders be prepared to wait that long? Perpetual is authorised and is a good firm. It must be looking at stakeholder as a big bowl of soup for it to dip its bread into.”
Jeffery says: “We think you should stick with people who understand and have experience of pensions. We are saying go for the ones who you think will be among the five or so survivors and we think that will include Standard Life, Sun Life and Scottish Amicable.”
Problems with choosing which provider to recommend have been compounded by the fact that IFAs have not received documentation until the stakeholder launch is almost upon them. This was a problem foisted on to providers by the late delivery of regulation details.
Bedford says: “IFAs need to compare the contracts to see what is distinctive. Scottish Widows, Norwich Union and Clerical Medical all have clear and simple paperwork but some providers are putting out literature that is hard to get your head around in a short space of time.”
Jeffery is also encountering a lot of apathy for the product from the market. He says: “We are rather disappointed at the lack of interest of many employees and the number of employers not wishing to make provision for employees. Providers are offering to put a computer in the staff canteen if 500 people take up stakeholder but the factory workers stakeholder is aimed at will already have a pension. I think this is a case of information technology answers looking for problems.”
Jeffery fears the whole project is doomed to failure. He says: “People are paying lip service to the rules until the Government compels them to do something. I do not think it is going to be what the Government wants. It will not work.”
Things will get going in earnest when the October 13 deadline for putting stakeholder in place focuses employers' minds as fines for non-compliance become a reality.