There are not many companies who would hand over cash for services they only vaguely understand. Yet this is the challenge facing advisers and payroll providers tackling auto-enrolment.
The process of educating employers so that they recognise the value of auto-enrolment support can prove costly, and there is a real risk any fees generated may not cover the costs in time, resources and energy. Add to that the risks of straying into regulated individual advice and the threat of retrospective regulation and it is not surprising many payroll firms look to partner with advisers to complete the service for their clients.
Whilst advice to employers is unregulated, I would recommend approaching it in the same way as you would any regulated business in terms of fact-finding, determining suitability and documenting the advice process from end to end. ‘Unregulated’ rarely translates as ‘risk-free’ and that is particularly true of auto-enrolment.
Adhering to the same process as you would for regulated business is not only a way in which you can further demonstrate the value of your services, but will also act as an additional layer of protection for both advisers and clients if you need necessary justify the actions taken at some point in the future.
With regard to suitability, a tiered approach is not just advisable, but is the only way to cater for the SME market. Those who see auto-enrolment as a cost to mitigate may want a very different proposition to those who see it as an investment in their staff.
From the payroll perspective, the ‘qualities’ of a solution will be in how complex it is to run and what costs it drives into their business. Many SMEs outsource their payroll of course, and the operational challenges to accountants and bureaux managing auto-enrolment across multiple clients, providers and systems will drive up the costs of these services.
By working with advisers, they can have the comfort of knowing their clients are getting the full support they need, implemented in a fully compliant manner and that the adviser can also consider the operational implications of different solutions. By bringing consistency across a book of clients those operational costs can be managed and controlled.
Similarly, when working with accountants, advisers need to have a documented, end-to-end collaborative process to follow. Accountants will need support in the areas in which they either do not want to or are unable to become involved, such as workplace seminars, pension freedoms and pension transfers.
Auto-enrolment, and pension work generally, can raise some complex issues and nobody wants a scheme to be put in place just because it is the easiest option for payroll.
When partnering with accountants, it is always advisable to do enough research to feel comfortable that this is an individual with whom you are happy to be professionally entwined; and you should expect them to do the same in return.
In addition to keeping compliant if this relationship leads to any regulated business in the future, you also need to ensure you have a good understanding of their business model and the processes and activities they will own to ensure there are no conflicts in the service you will be offering.
The fee structure needs to be realistic and clear from the outset; auto-enrolment is a big undertaking and an adviser’s time is valuable.
You may also need new software and systems specifically for these tasks and you will need to build the costs of these tools into your charging model. Some pension providers charge, some do not. Ensure that your client is aware of these fees, where relevant, from the moment you put forward your proposition.
A charging structure needs to take into account all the preparatory work an adviser will be doing; for example fact-finding, creating an implementation plan for the employer, helping to determine who should be included in the worker assessment, arrangement of salary exchange, and planning and delivering workplace seminars. The best models also reflect the costs arising from payroll to demonstrate the total cost to the employer.
SMEs will have budget and resource limitations, but with the steps outlined above, the value of auto-enrolment services can be compelling – profitably protecting existing clients and creating valuable new relationships. Applying the same processes to auto-enrolment that you would to conducting regulated business will not only save you time in the long run but could also add a layer of both quality of service and peace of mind.
Tom Nall is director of workplace solutions at SimplyBiz