As advisers hail Osborne’s Budget, the real work will begin

The Budget reforms have extended huge opportunities to IFAs and their clients. The Isa changes not only allow much more cash to be sheltered, while breaking the barrier between cash and equity Isas, they may well bring about a double Isa season this year.

The Isa shake-up would have been good news alone for investors and savers compared with previous Budgets. But income drawdown is also to be progressively liberalised and it will be possible to access almost all your pension cash, although whether the annuity is ‘dead’ or not remains to be seen. What is clear is that investment strategies geared towards annuitisation, both for individuals and workplace default schemes, may have to change – perhaps radically.

There will be a huge amount of work for advisers to do. Some public funding for some type of retirement advice or at least guidance may yet be forthcoming. Although such guidance could come from pension companies, it clearly would sit best, regulations and costs allowing, with advice firms. This presents clients with huge freedoms and advisers, and indeed their execution-only rivals, should see business boom.

Even Labour appears to accept the shape of the reform in principle, albeit with some reservations.

We are moving to a US-style system – and an unprecedented liberalisation. One exception is the likely restrictions to defined benefit schemes. That could, however, bring a mini-boom in transfers.

Investment strategies geared towards annuitisation... may have to change – perhaps radically

That is the good news, but here is the concern. Advisers have to get this right because it is an historic opportunity to prove the merits of advice and to demonstrate that professional advisers will always make sure clients understand what is best for them.

The Budget will allow advisers to encourage all sorts of good behaviours, but it will also require advisers to offer a dose of reality, amid predictions of a buy-to-let boom and pensioners running out of money.

More likely, more money will stay invested for longer and some clients will want to go up to the new GAD limits. Investment strategies may need to adjust and indeed that may be necessary anyway to cope with flexible work patterns around retirement. This should see advisers in their element, tested but hopefully found to be more than equal to the task.

There are pitfalls of course. Has best advice really changed in the past few weeks? If someone had opted to buy an enhanced annuity with most of their cash, is that now suddenly the wrong decision, especially as they move through their 70s?

What if someone wants to take cash when that isn’t in their interests? How long is the documentation going to have to get? What do they do once the Lamborghini breaks down and they can’t afford the repair bills?

And will advice rules mean that IFAs are unable to offer as much flexibility as other non-advised – and allegedly non-advised – options? For example, were the FCA to try to put the genie back in the bottle, maybe it can only do so for the advised part of the market. You can see why regulators are a little worried. Only a few months ago, some of the things being proposed by the government looked very like pensions liberation. Adviser representatives need to lobby for a coherent approach to all this.

However, advisers who stick to their training and principles and put client interests above all else should see themselves prosper. Whether this applies to the huge swathes of the public without an adviser, I am not quite so sure.s

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John Lappin blogs on industry issues at www.themoneydebate.co.uk