Sometimes having first mover advantage is of no benefit whatsoever. When I set up Syndaxi as a fee based business in 1998 we competed against firms who offered “free advice”.
Things got better when we spent longer explaining our approach and contrasting it against the approach of the majority, but I felt no early mover advantage till much later.
As the RDR came closer having over 15 years of costing advice put us in a good position but we still lost out to those who costed advice on what they felt the client would accept rather than basing it on what it costs to deliver.
I remain amazed at the number of firms who do not log time and therefore have no real information on what their proposition costs to deliver. As unbundling of charges become more prevalent this will become increasingly important.
The arguments continue on consultancy charging as we wait for Steve Webb’s consultation output re the fairness of it being applied when only minimum contributions are being made.
Personally I can’t see that it fits TCF from any perspective. Before anyone starts to hit the comment button let me point out that Influential MPs; the Financial Conduct Authority; and the DWP take slightly different views but they seem to converge on consultancy charging being inappropriate and not just for auto enrolment.
Now some argue that even if employees decide to opt out of advice then there can still be a charge for advice to the employer. This is despite that fact that it is paid by the employee through the application of consultancy charging to their pension plan.
I am sorry but this is an argument with no merit. After all, does an employee pay toward Health and Safety advice? No, they do not as the employer has to comply just as he has to comply under Auto Enrolment.
What seems to be happening here is that far too many advisers are seeing consultancy charging as an alternative to commission.
From the time that the Society of Pension Consultants published its guidance (having been asked to do so by the then regulator the FSA) the importance of the deductions being for the benefit of the member both in size and frequency has been made clear.
At the same time we have the announcement re the pot follows member only if we move to “clean pension wrappers”. This could have major impact on life company profits if the output from the Office of Fair Trading enquiry effectively cites any penalty as unfair then valuable cross subsidies will be lost.
The idea that this will apply only to “new” plans misses the point and if anything increases the risk that pre-RDR plans will be replaced or more likely the trail payments will cease and that income flow used to reduce the charges.
Returning briefly to consultancy charging, to have this debate so late is ridiculous. No matter where you stand on any of the key issues it should have been settled years ago.
Just where this leaves auto enrolment is anyone’s guess; those who played pass the parcel on this key issue in the FSA should feel ashamed that they have effectively robbed us of the most scarce resource, that being time.
Employers are now starting to realise that they need help but will quickly turn off if pensions are the leading edge of any pitch or conversation.
In closing, the news that Tesco is launching a non-advised annuity service made me wonder if the purchase of an annuity with them would qualify for Clubcard points? But, if so, would we then have HMRC popping up and taxing them after all there are just another rebate are they not?
Robert Reid is managing director of Syndaxi Chartered Financial Planners