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Scott Gallacher: It’s not profitable to just serve Joe Public


Over the next few years automatic enrolment is going to affect almost every employer and most employees in the UK.

For some advisers though, this may be a double edged sword. Those who have a focus just on individual clients are likely to find that a large chunk of their clients’ advice needs (that is, saving for retirement) have disappeared overnight as their clients’ employers auto-enrol them into inexpensive workplace pensions.

This is, perhaps, another factor adding to the perception that came to the fore with RDR: that it is no longer particularly profitable to focus just on the “man in the street”.  To be able to survive, let alone thrive, most advisers now accept they need to be working with other groups as well: wealthier clients, trustees and businesses.

But the really good news is one of those groups – the directors and business owners – now have an undeniable need for advice, giving us what is arguably a once in a career opportunity to engage with excellent potential clients.  At the same time, those of us advising today have a clearer field than ever before, since the RDR removed so many of our competitors – particularly the banks, which many employers might otherwise have naturally turned to.

Of course many employers’ first port of call will still be to their bank or one of the major insurers – but as we are seeing now, most will get little joy from them. 

Employers who try to do it on their own will also find it is not as easy as they might have imagined.  A key hurdle is we are already seeing schemes being “rationed” by traditional providers introducing minimum member or contribution restrictions.  It is also worth remembering auto-enrolment is not simply stakeholder mark II, where many employers could (and did) do very little.  This time, there are real obligations on the employer in terms of implementing and administering scheme on an ongoing basis, and more importantly most employers will have to make contributions. 

These factors mean a large number of employers will need to speak to advisers, and will naturally have to be prepared to pay fees for that advice.  And just look at the numbers:

  • It’s 4.9 million businesses needing help
  • 280,000 accountants
  • 130,000 solicitor
  • 30,000 financial advisers

That is one financial adviser for every 160 businesses, four solicitors and nine accountants, which is an amazing opportunity.

It is difficult to get any numbers on this, yet despite the opportunities, the feeling I am getting from my peers is most are not bothering with auto-enrolment.  This is a missed opportunity. If you are not offering your business clients auto-enrolment advice, then who else will they be speaking to without your knowledge? I have already heard of one adviser who by ignoring auto-enrolment found his two key clients being poached by another adviser who was originally brought in just for auto-enrolment advice, but who the clients then found could offer the full range of advice.

Still, the bright side is every adviser that ignores auto-enrolment just increases the opportunity for those of us that are actively involved.  Auto-enrolment, for those who decide to take it on, can be seen as a great opportunity and great timing for our profession.  

Of course it might be best not to mention this happy combination to your clients, many of whom will naturally see it as an unwelcome burden.

Scott Gallacher is director of Rowley Turton 



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There are 9 comments at the moment, we would love to hear your opinion too.

  1. Many people have expressed opinions that they think AutoEnrolment will be a flop. Who knows? One thing i can say is that it isn’t going to go away. Pension provision needs to be made more mainstream and AutoEnrolment is as good a strategy as any.

    My thoughts are that it is too big an opportunity to miss. By opportunity i don’t mean AutoEnrolment itself will be hugely profitable, i mean that it is a huge opportunity to pitch the benefits of advice to a huge number of people that wouldn’t under normal circumstances engage with advisers.

  2. ” pitch the benefits of advice to a huge number of people that wouldn’t under normal circumstances engage with advisers.”

    This is exactly what the article seems to be trying to get across – these are precisely the people who are (and probably rarely have been) not particularly profitable on whom to focus. I have been saying that for years and agree completely with Scott. His numbers say it all. He omitted to say how many higher and marginal rate taxpayers there are – more than enough to go round!

  3. “It’s not profitable to just serve Joe Public”

    This headline reminded me of a moment in time from my childhood; the first time I saw a Ferrari, my nose pressed up against the showroom glass, then the voice from the salesman (in a rather gruff tone) “come back when you av enough money sonny”

    Probably where we are today as advisers ?

  4. DH

    Spot on. Not only today.

  5. @Harry Katz

    I think we’re in agreement then, although i didn’t fully understand the tone of your comment.

  6. This article seems to be saying that auto enrolment is a great opportunity for advisers to get business by arranging schemes for employer’s who have no existing arrangement with an adviser. Where as Harry Katz, seems to be saying that advisers should go up market and not bother with average man or woman on the street. However, he seems to be at cross purposes as he states that he agrees with the sentiment of the original article. I am sure he will enlighten us as to what he is actually saying.

  7. @Nick Wardle

    I think we are. What I have been trying to get across is why fish in a shallow pool when there are enough big (and profitable) fish to go round when you fish in the open sea.

    As DH has said, you can’t shop in a Ferrari garage unless you can afford the car. It would seem that there are still those who are trying to sell Ferraris to those who only have Daewoo money.

  8. I think that auto enrolment is a cracking opportunity in many ways. We are a relatively young firm, building a client base etc. AE has to date got us through the door with a number of accountants who then have referred us to a number of company owners needing their AE sorting. We do that for them and then have the chance to bring the directors on as clients as they will benefit from the advice that we can give (this has been helped by pensions becoming so much more attractive). We haven’t got involved with any members of schemes yet and I can’t really see this changing over the next couple of years.

  9. @Dave

    This is a useful comment and just goes to show what rubbish AE is and how poorly treated the members of the plans are. Not that I can blame you in the slightest for not getting involved with the members – that just isn’t a viable or pofitable path. But it is the members’ pensions and they are out of the loop entirely which is hardly ideal from their point of view.

    As I have said before AE is nothing but a Moron’s pension and I foresee members ruing the day that they got roped in and lost disposable income as a result. Those that wan’t pensions or the firms that wish to provide them should be able to use decent plans and who are prepared to take advice (both firms and members) and pay for it. Anything else is second best – by far.

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