Retail financial services are in transition and like most evolving institutions, services and industries, no matter how expert we are, we will be speculating if we pretend that we know the outcomes.
Of all the challenges facing UK plc, the radical overhaul of defined contribution pensions from April is the most exciting.
The changes will open a new pathway to a number of expectations and services, from people with small pension pots accessing them in order to fund delusions of grandeur, to product providers with outdated business models and products, re-engineering them in order to meet some of the new demands.
Given all this, let us just look at the all-important At Retirement sector, which is where most of the challenges will be concentrated.
We have now had about 10 months to deal with the changes announced by the chancellor in March, with a further four or so to go.
Yet, very little has publicly happened in the At Retirement market: no attempt to educate the general public about risk and reward, especially in a low interest environment, even though we know, as night follows day, that most providers will be designing and distributing products not fully understood by the public.
If you think this is outrageous, then consider that it is already known internally at the City regulator that even experts such as actuaries sometimes do not even understand the promises of the very products they have been responsible for designing.
Given this scenario, how then can ordinary men and women managing large sums of money for the first time do so with the expertise and confidence needed if they are going to provide an income for the rest of their lives?
How then do we keep a careful eye that the providers of investment vehicles are not distributing products that they want to sell rather than what people really need?
Are the regulators, the public watchdog, equipped professionally to scrutinise the design, distribution and pricing of these new products that we can expect to flood the market from April?
With about 100 actuaries at most on its staff, can the Prudential Regulatory Authority keep a watchful eye on these providers, large and small, old and new, in time to prevent Joe Public from wasting their pension pots?
Remember, there will be a chasm between customers and providers, an asymmetric relationship that opens the way for all kinds of dishonest behaviour, or simply businesses looking for yield in this environment just cutting corners.
But it is not the responsibility of the customer to understand risk and return, although it is fair to say that explaining is not enough; risk should be measurable and affordable, and this must be at the very heart of any advice investors receive – it also makes the amateur idea of guidance itself high risk.
With a narrow concentration on the At Retirement market, we will see new business models, new strategies, innovative products, all aimed at doing business with the newly enriched pensioners.
Finally, there will be a huge public interest risk – and a conflict with commercial interests - if this radical pension policy fails; the danger is that those who blow their money must in the main fall back on the state.
There is a debate to be had, so let us start talking.
