IFAs should not get trapped in the negative doom and gloom spiral about
declining pension revenue as a result of the introduction of stakeholder.
On the contrary, the welter of changes in pension legislation offer
advisers a myriad of hooks to get in front of businesses and write
lucrative pension contracts and explore other opportunities for financial
products in the corporate market.
All they need to do is remember the three Rs. Getting in front of a
business is a question of stimulating interest in what you have to offer
and many summarise this process as delivering the right message to the
right audience at the right time.
Delivering the right message to the right audience requires targeting and
one of the simplest methods of segmenting business audiences is to deliver
tailored messages to small, medium and big businesses.
Depending on the size of your own practice and the resources you have
available for your own campaign, you may be more comfortable targeting a
specific business segment.
Many argue that a good hook to secure pension contracts with smaller
business owners/directors is a review of the here and now issue of drawing
more money from their business rather than a dreary pension planning
IFAs can put forward a whole host of solutions that give busy business
owners/ directors more cash in their pocket, ranging from paying dividends
instead of salaries to the prospect of setting up a new business to
Schemes for business owners to retain more of their cash are underpinned
by different types of pensions and the common motivation of all business
owners and directors to be able to take more cash out or their company is
an excellent route into the corporate pension market.
Building on these pension-based tax mitigation opportunities are the other
benefits of executive-type pension plans such as using a pension
contribution to help buy a commercial property rather than rent.
Medium-sized businesses with five employees or more may or may not be
aware that they will have no option but to provide private pension
IFAs can really add value to these businesses, notifying employers of
their new pension obligations to their workforce and detailing the choices
The IFA can offer membership of a good group personal pension scheme and,
subject to exempting conditions, allow the employer to ignore stakeholder
and all the inherent issues of offering a new product in a tight timescale.
Not only can group personal pensions encourage collective pension
provision, as they are outside the stakeholder environment, they can also
provide a valuable income stream for the IFA.
Such group schemes allow even employers with only a handful of staff to
offer workers a valuable boost to their salaries through a company pension
The benefits offered may also include group life insurance, income
replacement insurance for the long-term sick and private medical insurance
and economies of scale mean these benefits cost the company only a fraction
of the true value to the employee. At the same time, if relevant, the IFA
can discuss executive pension plans with directors.
For bigger companies with an occupational pension scheme, the option of
partial concurrency which allows members earning less than £30,000 to
hold an individual pension at the same time could offer a more attractive
top-up opton than in-house AVCs.
This is because stakeholder has low admin charges and a quarter tax-free
cashback option, whereas cashback is not available on pre-1987 AVCs and has
never been available for FSAVCs.
Also, this audience can provide a receptive market for other aspects of
Just as the number of angles IFAs could take to get an audience with
corporate clients are legion, so are the ways of making contact and the
choices are widening.
There are the traditional marketing methods of mail-shots, phone
canvassing, seminars, advertising and PR. My own network has a library of
pre-prepared material for members' use.
Consider new media. For example, the use of email is a particularly
appropriate method of approach to high-tech companies. The Direct Marketing
Association (www. dma.org.uk) can help you source lists.
Another way of reaching businesses is through professional introducers
such as solicitors and accountants. Again, methods of contact are wide, as
are appropriate messages, but these people are increasingly receptive to
ideas for new income streams as more competition for their traditional
services such as willwriting, book-keeping and conveyancing has led to a
decline in bread and butter business.
Financial services and investment business touch on most aspects of legal
and accountancy-based advice.
The opportunities are there for IFAs to discuss the implications of
changes in the pension market with corporate clients or prospects.
In doing so, you can ensure that not only are your clients complying with
the new legislation but that you seize the new business opportunities that
The results might well surprise you. Although there is a lot of noise
about stakeholder arousing curiosity, there are plenty of opportunities to
discuss other products on the back of this latest pension shake-up.
For many IFAs, this year should represent a watershed in terms of client
communication. Not for the first time in recent years, employers are faced
with changes in pension legislation which cannot be ignored (unless the
prospect of a fine from Opra is not an issue) and they have a specific
timescale in which to comply.
Take-up is likely to be poor without any significant employer contribution
and communication to 250 staff could be a labour-intensive process with
little reward for the independent adviser in terms of initial income if
commission is required so product sale becomes crucial to the revenue
This is where an import-ant issue arises for the IFA.If a commission-based
approach is taken, this client poses a high risk in terms of potential
time/reward in the short term.
If a fee-based approach is sought, then this is less of an issue, allowing
the IFA to offer a menu of services based on the level of proactive
Set this against the background that this may be
an important existing client
whose existing business is of great value and the issue is
really to provide an effective, low-cost solution that meets
the employer's requirements while maximising the potential income stream
from 250 potential new clients.
For this reason, it is clear that, irrespective of the IFA remuneration
route, every opportunity to offer services to these “clients” in other
areas needs to be considered as a means of cross-subsidising time spent on
(in this instance).
While paper-based communications are still effective for many,
increasingly, bigger companies are establishing intranet sites – internal
web- style pages with the ability to provide information to their employees
and, importantly, links out to third-party sites. Working with the employer
to provide stakeholder information via links to either the IFA's website or
direct to the product provider has benefits for all.
The IFA can enable potential members to self-service with regards to
quotations and key features while what-if calculators enable employees to
run various scenarios online.
The employer avoids the need to be directly involved in the communication
process and can direct internal quer-
ies to the intranet and the employee has access to instant information
which is not reliant on the availability of a representative from the
Agreed levels of access to the employees could form the basis of
negotiation with the employer over cost. If it could be agreed to insert
links to the IFA's site from the intranet, then multiple cross-marketing
opportunities open up.
It is crucially important to note that through all these web-based
processes there will always be the need for personal support and contact.
If the IFA is to offer a menu of services from intensive face-to-face
counselling to a remote, execution-only offering with no face-to-face
contact, then there will need to be the additional support from experienced
Who will provide this? I think employees need access to a dedicated
communication centre which can support both IFA and employer/employee at
varying levels depending on the menu of services being offered. This
service provides the additional support needed for those that feel
uncertain about a self-service option.
What guarantees do clients have of sufficient investment to ensure such
communication and support is of the level that they deserve? They can
always take their business elsewhere.