The end of pension commission has arrived and the world for corporate advisers has fundamentally changed forever. This will have a more profound effect on corporate advisers than RDR or sunset clause has on their private wealth peers. Acting as a “broker” to distribute other people’s products is not a sustainable business model. Corporate advisers must change or they will die.
With all but the smallest employers now having implemented auto-enrolment, traditional services that corporate advisers have provided may now be irrelevant. There is no need to encourage new employees to join the workplace pension, they join automatically.
The charge cap means many workplace pensions have more streamlined investment options and price differentials are less marked, undermining the value of re-broking exercises. Even where these services are still valued by employers, how many will be prepared to write a cheque at the levels previously provided by commission?
But is there optimism for the future? Absolutely! The workplace is changing. Growth in high skilled jobs is coming from the SME sector, rather than big business and the public sector. To meet their growth plans, SMEs need to recruit, reward and retain the best people and, as the millennials start to enter the workplace, people are changing.
Research shows that the brightest talent is no longer seeking the best paid jobs; they’re actively searching for the best employers instead. At the same time, the days of an employee having one or two employers in a working life have gone – it is estimated almost 40 per cent of employees are ‘keeping an eye out’ for better job opportunities.
But these SMEs face a huge challenge. The majority just do not have the internal expertise or time to create and communicate an effective workplace benefits package. Traditional reward and employee benefit consultancies have always struggled to service this market as the cost base and business model is just too rich. Corporate IFAs are ideally placed to meet this need, but we need to widen our expertise away from workplace pensions and group risk product broking and help our clients understand what makes their employees tick.
We need to know what their needs and aspirations are and find new ways to meet them. Who could be better positioned than a corporate IFA who has spent years speaking to individual employees and really understands them? Whilst pension and protection will continue to be important, helping to save for a deposit to get on the property ladder, paying off student debt, or even a cheap iPad might be more important to a millennial.
Even within the workplace pension sphere there are opportunities if we change. There is increasing focus of good governance and financial education, with both Government and regulators seeing the workplace and employers as the key to solving this problem. Employers will increasingly need our expertise and knowledge to meet these challenges, rather than financial products. If they understand the value, they will pay for it.
There is no doubt the end of commission is a big challenge to corporate IFAs, but for those who can adapt, there is a bright future ahead.
Sean McSweeney is corporate advice manager at Chase de Vere