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