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Leading questions

Laith Khalaf
Laith Khalaf

Hargreaves Lansdown is not a typical adviser business but the company feels that its approach to the retirement market has set it up to be a leading firm in the sector for many years to come.

With a client bank split 90 per cent self-service to 10 per cent advised clients, Hargreaves Lansdown says its business model allows most people to get on with what they are happy with, leaving the advice portion for those who really need or what it.

Pensions analyst Laith Khalaf says: “The key to advice at HL is we believe that most people can make the majority of their own investment decisions without advice. We provide information to clients to help them make their own decisions, thereby saving themselves thousands of pounds in unnecessary fees and commission – an estimated £120m in the last year alone. Therefore, only clients who need pension advice actually receive pension advice.”

In addition, a streamlined business process means that advisers are free from inefficient and expensive uses of their time.

“In a standard client/ adviser relationship, every communication passes through the adviser, which is immensely inefficient. At HL, the client’s service is delivered by the teams best placed to provide that service. For example, the adviser provides just the advice. Client support is provided far more efficiently from our highly trained Bristol-based helpdesk. Being both product provider and adviser helps here, it is a one-stop shop.”

The provider element to the proposition is the Vantage Sipp and Khalaf says Sipps have transformed from a niche product into a mainstream product in its own right. “With around 500,000 Sipp plans already set up, they are no longer a niche product and actually haven’t been for many years. Most personal pension providers have now re-invented themselves as Sipp providers.”

Khalaf says pensions will continue to be a key growth market both for the industry generally and for Hargreaves Lansdown. He says: “Pension and retirement planning has been a growing part of financial services businesses for many years and we expect that to continue at pace. We are already well positioned to be able to take advantage of the huge expected increase in numbers and will continue to develop our proposition to remain in pole position.”

Khalaf says this growth is being driven by a continued realisation that people will not be able to rely on the Government for their retirement income.

“People are increasingly realising that they are responsible for funding their own retirement. This is driving demand for private pension provision.”

The introduction of auto-enrolment and the national employer savings trust will see a huge increase in the number of pension savers but, like many IFA firms, Hargreaves Lansdown is not anticipating an increase in business because of this.

Khalaf says: “We do not think that there will be a great demand for bespoke advice from Nest investors. Nest will exist in a parallel universe from other pensions as there will be no transfer in or out, the only real question is therefore whether to stay auto-enrolled or opt out. The idea behind Nest is that most of the target group won’t even ask this question, they’ll just stay auto-enrolled. More generous employers may pay for advice and communications for their employees.”

Khalaf: ’People are increasingly realising that they are responsible for funding their own retirement. This is driving demand for private pension provision’

Khalaf says the opportunities for advice will be with people who want to take more control of their retirement planning and predicts a polarisation between those people who are in Nest and people who want a pension with more flexibility.

He says: “Nest will take care of those who aren’t interested in taking control of their retirement, Sipps will service those who are. It is difficult to see any middle ground for personal pensions in between these two.”

To help the future growth prospects for pension business in general, Khalaf says pensions regulation is badly in need of reform, particularly in the areas of the new tax relief rules and compulsory annuitisation and inheritance of pension benefits.

He says: “Four years on from simplification, we need re-simplification. The new rules for high earners are too complicated and undermine the simple message that the Government supports saving for retirement. Permitting crystallised pension funds to be passed on to the pensions of children and grandchildren would be popular, as would the abolition of compulsory annuitisation, as promised by the Conservative party.”

And the last thing that will encourage better pensions take-up, more technology and the ability for clients to manage their pensions themselves.

Khalaf says: “Online functionality of pensions is key to engaging pension inves-tors in their own retirement, as is development of pension calculators and other tools that make it as simple as possible for investors to understand the benefits of pension saving.

“People just want to be able to see their pension and deal with it online, just like they can their bank account. The high demand is there already.”

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