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Nigel Chambers

In terms of opportunity for building up a corporate client base, stakeholder ranks alongside the introduction of Serps and contracting-out in 1978 and personal pensions in 1988.

We have less than a year before 300,000 companies need to have stakeholder or stakeholder-exempt arrangements in place. This is a major challenge which I believe the IFA sector is best placed to meet. I also believe stakeholder does not need to be seen as a loss leader as far as the IFA is concerned.

The reason stakeholder business can be profitable to the IFA is very straightforward. Leading providers have recognised that next year will be crucial in building market share in the corporate pension arena. The commission arrangements being offered effectively allocate half the total 1 per cent margin available to the distribution channel. Offices are gambling that they will attract a sufficient volume of bus-

iness to bring their investment costs down and that they will rapidly be able to reduce admin costs through electronic trading, reductions in paperwork and simplified regulation.

From insurers&#39 perspective, stakeholder does seem something like a loss leader. However, they will also have factored into their equation revenue from contracting-out rebates, the possibility of future compulsory contributions, the opportunity for selling other products through worksite market-

ing and the fact that corporate pension business shows significantly better persistency than individual business. Once a company has decided to set up a scheme and assist in its promotion to employees – and if the scheme is properly serviced and members communicated with regularly – it is most unlikely to change either adviser or provider.

If leading providers are playing their part, why do so many IFAs see stakeholder in a negative light? Possibly, this is because stakeholder means different things to different people. At its most negative, it is a voluntary facility which employers will set up reluctantly, pay lip service to in terms of promotion and no one will ever join. At the other extreme, the 1 per cent charge cap is “Government approved” and should become the standard, not just for stakeholder but all forms of pensions. How we use this opportunity is crucial.

I believe the key is communication. There are three stages in this – explaining why an employer should use an IFA to set up a plan, explaining what employers should be doing to help employees plan for their retirement and explaining to the employees themselves the necessity for pension planning.

The key arguments for using an IFA are, in a sense, standard. We are not tied and will choose from a range of suppliers, recommending a change when needed. As a corollary to this, the IFA can take the blame if the choice is wrong. Despite the legislation, many employers still seem worried by the necessity for them to be seen to recommend a provider. At the same time, we can provide the necessary promotional activity and provide advice. This last aspect is vital. There is no clear line of distinction between information and advice. As IFAs, we can embrace the fact that both are needed and can be provided from the same source.

There is no substitute for face-to-face marketing of pensions. Paper-based promotion will work for some people, call-centre arrangements for others and the internet for a small number. However, take-up using any or all these methods in combination will not get the job done. We need to look for ways to change the process, spend less time with members helping them fill in forms and more time answering their questions. Most employees know they need to plan for their own retirement. Much of our task is simply to provide the opportunity. This is our challenge and this is our opportunity.


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