Matthew Mitten has mixed feelings about the Government’s auto-enrolment charge cap. As a partner at Secondsight, the employee benefits arm of national advice firm Foster Denovo, Mitten is no stranger to the intricacies of corporate pensions.
And although he understands the logic of the 0.75 per cent auto-enrolment charge cap on default funds, to be introduced next April, he is concerned about the consequences of this and the commission ban that will follow in 2016.
A particular concern for Mitten is how the benefits of auto-enrolment can be effectively communicated to employees once the changes come in.
“I believe in good outcomes for people and low charges are one factor in that. But it’s a shame that the other factors aren’t being considered,” he says. “Commission is used to pay for services and communications to employees. Employers want to look after staff and believe the best way is if they understand what they are doing and what they are paying for.
“Unfortunately the gap is getting wider for access to good quality information and advice.
“The charge cap may remove commission from pension schemes where clients are trying to educate and auto-enrol their staff, so there won’t be the budget for advice. I’d prefer to see something that allows quality schemes with a reasonable cap and commission in place.”
When Mitten says auto-enrolment has “gone pretty well so far”, he speaks with the confidence born out of personal experience.
“We got into auto-enrolment two years ago and thought how complex is this? We’ve done around 150 auto-enrolment projects now and have a well oiled team so the process is smoother for clients. For the earlier clients it was a bit trickier,” he says.
He says Secondsight is often called in to rectify problems with auto-enrolment schemes set up by other firms. “Where a post-auto-enrolment audit has found there are problems with a scheme we can go back into it and look in detail at the areas of risk. You can find that it hasn’t been set up properly or that it could be done better,” he says.
Auto-enrolment provides plenty of opportunities for advisers, according to Mitten. “Capacity is critical down the line, we all know that. How do we deal with that? How do you deal with the many hundreds or thousands of employers who don’t have scheme in place?”
Mitten feels it is not hard for advisers to get a foot in the door of auto-enrolment but tougher once they are working with a client.
“Most advisers who deal with pensions see the opportunities. But setting up a quality scheme involves human resources, legal and compliance – all sorts of things. Advisers get into it then realise there are many things they didn’t know.
“From the work we do going into schemes set up by other companies, we’ve seen that things haven’t gone right. Once you’ve gone into it you find it’s more complex than when you start out – and the client doesn’t realise it is more complex,” he says.
So what is Mitten’s suggestion for advisers who want to get into auto-enrolment? “What’s worrying is how few people have taken the Pensions Management Institute’s Certificate in Pensions Automatic Enrolment. There were only 250 advisers out of the 1,000 candidates who have taken the exam.
“I think that would be a good place to start, so you get an understanding of the complexities and challenges. It gives you a certificate and credibility.”
Mitten’s career veered towards employee benefits around 2000 and in 2001 he joined Bates Millfield as an employee benefits consultant. He had embarked on a financial services career at the tender age of 23, not really knowing what a financial adviser was.
His first job was as a tied agent at Old Mutual. “In that environment you learn resilience,” he says
“It was a different environment to the area we are working in today. It teaches you soft skills, emotional elegance, how to read a person and sales skills.”
Being tied and being independent
Mitten then moved to IFA firm Inter-Alliance. “There is a big difference between being tied and independent. Being independent feels more professional.
“You got the benefits of being a tied agent drilled into you and you’re impressionable at 23. But then you realise there are more benefits to being independent,” he says.
Mitten still retains his longest standing corporate client. “One of my clients was a small telecoms business. I advised them when they started out– they wanted some advice and a pension for themselves. Then they thought they should do something for their staff so they asked if I would help with their staff pensions and other benefits, so I got into employee benefits that way.”
The pressures faced by employers are something Mitten is acutely aware of.
“There is always pressure to reduce costs. Employers want to do what is right for employees but they have to maintain managed costs. There is a push and pull between human resources departments and finance. There are always problems with budgets but we have to tailor what we can do to a budget. Employers might say they can’t afford to do what they want to do for their staff, so we try to be creative.”
Mitten is passionate about financial education and communication in the workplace.
“That is crucial now we’ve got auto-enrolment,” he says. “But there has to be two-way communication – just pushing information at people is boring.
“People are deluged with emails so the chance of reading them is low. With a bit of humour, lots of colour and imagery you can engage and communicate with them.
“The employers we’re talking to want to do that.”
2006-present: Partner/equity partner, Foster Denovo
2001-2006: Employee benefits consultant, Bates Millfield
1998-2001: Independent financial adviser, Inter Alliance
1996-1998: Financial adviser, Old Mutual
What is the best bit of advice you’ve received in your career?
Do what you say you are going to do.
What is keeping you awake at night?
School fees. I have three children.
What has had the most significant impact on financial advice in the past year?
The auto-enrolment charge cap.
If I was put in charge of the FCA for a day I would…
Commission an investigation into how we can reduce the amount of paperwork that is sent to clients from pension providers. Particularly group personal pension regulatory wording as it is very complex and not everyone understands it.
Any advice for new advisers?
Remember to focus on people skills, sales skills and soft skills. There is always an emphasis on qualifications but you are dealing with people.