InvestmentsApr 20 2015

Overhaul opens up opportunities

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The overhaul of the pensions industry has generally been hailed as an opportunity for investors and consumers, who now no longer have to buy annuities when they reach retirement age.

Dubbed ‘pension freedoms’, it is widely felt the investor community will benefit the most from the reforms.

But what are the opportunities for advisers and advisory firms?

According to the results of the BlackRock Investor Pulse Adviser Survey that canvassed opinions from 250 financial advisers in the UK, 70 per cent believe their clients are concerned about outliving their savings in retirement, and 71 per cent of advisers think their clients are planning on working longer and retiring later.

All of which suggests that those who currently have an adviser will require their services until far later in life and those who do not currently use an adviser may well think they need one to plan properly for retirement.

Doug Ryan, a consultant at Mattioli Woods, observes that the changes will encourage people to “be more engaged with pensions”.

He says: “I think generally it’s an extremely positive pension legislation change for both advisers and the public, and it will resonate with the public, which can only enhance advisers’ roles in their clients’ lives.”

Jeremy Roberts, head of UK retail sales at BlackRock, believes the need for pre-, at- and post-retirement advice is an opportunity for UK advisers.

He explains: “The flexibility which the changes have brought is welcomed… by advisers. But I think that change brings uncertainty and uncertainty brings the need for people to seek help and seek further advice.

“So I think it is an opportunity for advisers because customers will need more advice. The flexibility is great but there are an enormous amount of options now and therefore the consumer will need help on which direction to go.”

In his conversations with advisers, Mr Roberts has found that the majority think the new pension freedoms are a blessing, not a curse.

But he cautions: “I think the important thing here is that, ‘Yes, flexibility is great on [the] one hand but it does come with a health warning’.

“Are they going to invest that wisely? Are they going to leave it in cash? Are they going to spend it?”

It seems advisers now have not only an opportunity, but a responsibility to educate their clients about what to do with their accessible pension pots.

So is the adviser industry prepared for the changes?

FundsNetwork’s Adviser Class of 2015 Survey, which had 209 respondents, suggests the majority of advisory firms are prepared for the reforms. Of those that were asked ahead of the introduction of the changes on April 6 this year, 94 per cent of firms stated they were either fully (32 per cent) or somewhat (62 per cent) prepared for the changes.

Jon Everill, head of advisory services at FundsNetwork, notes that while advisers are set up for the reforms, their clients are not.

“Advisers have a great opportunity to demonstrate the value they provide by helping clients understand the new rules and navigating them through the options to ensure they get the best possible retirement outcomes,” he adds.

Mr Ryan agrees: “I think the vast majority of advisers are well geared up to provide advice. However, I think the understanding of the public generally is something that will need aligning with the rules because inevitably we do hear people phoning us asking some questions about how this practically works.”

In canvassing the adviser community about its preparedness, Mr Roberts says the consensus is that “yes, they are” ready.

“Plenty of training has been made available for those who wish to develop their propositions in this market,” he says. “Advisers’ business models have changed and… the opportunity for advice throughout a longer time period is clear.

“Further education is always required and that’s the job of us in the investment management industry and the job of the adviser, of course.”

Ellie Duncan is deputy features editor at Investment Adviser

ADVISERS’ VIEWS By Nick Kinsey

Patrick Connolly, chartered financial planner, Chase de Vere:

The new pension freedoms are a blessing for financial advisers, according to Mr Connolly. “The increased complexity and greater risk in pension schemes mean that people are more liable to make mistakes with their money,” he points out. With that in mind, Mr Connolly is keen to stress that “everyone seeking pension benefits must have secure income in place in order to meet their living costs, before they look to use their flexibilities”.

Martin Bamford, chartered financial planner, Informed Choice:

Martin Bamford says the new pension freedoms “highlight the importance of financial planning”.

“The need for professional advice has never been greater, with pension pots becoming part of a range of assets individuals are likely to draw on during retirement,” he adds. Mr Bamford observes that the “pretty weak guidance package offered by Pension Wise only strengthens the requirement for expert advice”.

Susan Hill, chartered financial planner, Susan Hill Financial Planning:

“Clients having a wider choice makes my role… in greater demand,” Susan Hill says. “The rise in opportunities, due to changes in people’s options, will invariably lead to an increase in the chances of people making mistakes.”

She categorises those likely to make financial mishaps as “spending-spree pensioners”. Ms Hill adds that she has seen a fourfold increase in people seeking her advice.

Jaskarn Pawar, chartered financial planner, Investor Profile:

Jaskarn Pawar believes the changes bring “an awful lot of flexibility into the retirement-planning process”.

“This is good as the client situation can benefit from it,” he adds.

But Mr Pawar remains cautious about the reform’s general impact. “For the wider masses I guess we’ll wait and see how sensibly they react to what is effectively a windfall, although I’ve already had plenty of calls from people wanting to release their pension money,” he says.

Key figures

71%

Percentage of advisers who believe their clients plan to work longer and retire later in life

32%

Of the 94 per cent of advisory firms prepared for the pension freedoms, almost a third say they are “fully” prepared