Auto enrolment has divided opinion among financial advisers, with many claiming that a lack of eagerness from providers to accommodate small businesses has turned an opportunity into a headache.
Those with corporate clients, however, have had to plough on regardless and in some cases have signed strategic agreements with providers to mitigate the inevitable risk of latecomers being refused schemes. By agreeing to a partnership these advice firms can guarantee their least profitable clients a place on a scheme, which means sidestepping a potential capacity crunch and bargaining for betters fees.
But while such pacts may present struggling advisers with a viable and efficient solution to navigate a market in disarray, others have questioned the morality of independent firms striking deals with certain providers by claiming that it undermines the principle of whole-of-market advice.
Its negative perception was inadvertently made clear by Standard Life’s head of SME workplace proposition, Alan Ritchie, who when discussing his employer’s deals added that many advice firms had signed up but requested not be named for fear of being “misrepresented”. Others such as LEBC and PI Financial, however, openly admitted to signing up deals, with both claiming that the benefits far outweighed any negative stigma.
Tim Sutcliffe, managing director of Pi Financial, said his firm came to an arrangement with Carey Pensions UK because pension product providers were pulling out of the market and economies of scale meant better prices for clients. His line of thinking was similar to that of LEBC’s Keith Allnut, who claimed that a deal with Standard Life gave clients a guaranteed brand name, as opposed to “getting stuck with Nest”.
Both Pi Financial and LEBC confirmed that the deals did not undermine their independent statuses, and that other schemes would also be consulted to get the best arrangement for clients.
But while advocates were quick to describe their strategic partner schemes as last resorts, sceptics of these arrangements have voiced fears that they would inevitably cause clients to be shoehorned into funds irrespective of value. One adviser, for example, claimed to also have been approached by a number of providers but refused because he was determined to respect his independent status.
He said that auto enrolment capacity represented a huge challenge, particularly because Nest was perceived negatively and big-name providers were not interested in smaller, less profitable companies. For this reason he understood the logic behind actively seeking deals, even if such arrangements appeared to completely undermine the ethos of whole-of-market advice.
Yet with most advisers ruling out Nest because of its negative reputation as a stop-gap and last resort, the industry has found itself in a tricky position with just two apparent options. Whereas some have risked potentially undermining the validity of their independent status by signing a deal, others are praying that providers keep the gates open when the crowds pick up.
