Pension freedoms reforms are under starter’s orders

Advisers will be servicing clients, while pension providers will be answering all manner of queries about how retirees can get easy access to cash, etc. But has the message gotten across to the managers and the platforms that things need to change?

The market ought to be significant, because it is clear many more people will be staying invested, but what will they stay invested in?

In the past few weeks, I have heard Richard Romer-Lee, managing director of Square Mile Investment Consulting & Research, suggest that neither platforms nor fund management groups were ready.

He also implied that the various multi-asset income offers were an attempt to address the market.

I also heard at an industry event that Stephanie Condra, Axa Investment Managers’ retirement markets strategist, was going to some lengths to ask advisers what they wanted.

There will be notable exceptions, but it does feel like there is something of a communications failure between investment advisers and fund managers.

It is also quite possible that a huge number of people will pay off mortgages, go on holidays, set up buy-to-lets or take cash

The question is, why? Here are a few suggestions:

The first is that this new pension freedoms segment is not seen as a core market. It is possible to argue that many of the financial-planning challenges have not altered dramatically, so nor will many of the investment solutions. Perhaps the reforms are a mid-market affair?

The second, and arguably more significant, issue may be that fund managers are waiting to see what the public does. We know that hundreds of thousands of people are waiting for the start date of the pension freedoms, but professionals are still unclear what they will be demanding.

It is also quite possible that a huge number of people will pay off mortgages, go on holidays, set up buy-to-lets or take cash. In such instances, there may not be much call for fund management or at least not fund management as we know it. But it would be a great shame if people left a large amount of money languishing in cash.

It could be that the debate over charges for drawdown – which would certainly be a lively one in Labour party circles – is one that fund managers do not want to engage in, although a change of government would mean they would have to. That could prove very challenging given that I have heard public affairs expert Mark Twigg of Cicero Group say that the only fund managers with the ear of Labour were the passive managers.

Finally, the traditional pattern of fund launches might not fit this market. Designing a fund that will appeal to big brokerages and DFMs, and then a few years down the line spreading the word to mainstream advisers may not be suitable.

Yet surely this is already out of date in a post-RDR world.

There is danger in generalising. There may be platform and fund management strategy teams reading this and saying: ‘We are working very hard to deliver on this.’

If so, there may be an opportunity to establish a lead. But if you are an investment adviser and are dissatisfied, then maybe you should get on the phone and demand more action.

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