Advisory firms can guarantee their financial futures by expanding into auto-enrolment, according to industry experts, but could do with more transparency from pension providers to make selecting schemes easier.
Graham Peacock, who recently joined Goddard Perry to head up its Salvus master trust, argued that the only way to get the 1.8 million small and micro employers through staging from now until 2018, is through advisers and accountants partnering to be the gateway to providers.
He said: “The message is that advisers can secure their businesses’ future through the potential revenue to be made in this stage of auto-enrolment. They can make themselves effectively workplace councillors, cross-selling more than just pensions to smaller corporate clients.”
He explained that the adviser deals with suitability, while accountants can handle the administration “nitty gritty”, although the former does create a challenge for IFAs, as many have struggled to accurately compare different pension scheme propositions.
“I’m frustrated that providers aren’t publishing the inner workings of their schemes - particularly the performance of default funds - it is critical that we’re seen to be transparent.”
Mr Peacock’s comments came as the public accounts committee published the results of its inquiry into automatic enrolment.
While it said said the Department for Work & Pensions has successfully implemented auto-enrolment for larger employers, the report stated “the real test is still to come” with the enrolment of smaller firms starting this year.
Morten Nilsson, chief executive of Now: Pensions, agreed to provide the hands-on administrative support small firms need, many financial advisers are partnering with accountancy and payroll bureau firms who can handle auto-enrolment processing for their clients.
Research his business conducted with more than 200 small firms in October revealed 63 per cent did not describe themselves as confident when it comes to handling the administration of their pension scheme. Amongst specifically micro employers, this jumped to 72 per cent.
Mr Nilsson also concurred that comparing auto-enrolment schemes is not simple. “Traditional industry product research and ratings companies such as Defaqto, Capita/Synaptics have all tried, but they are not addressing many of the relevant issues that apply to auto-enrolment as faced by SMEs and micro employers – or their advisers.”
“The research companies tend to assume that the products deemed the ‘best’ for the existing group pensions market are going to be the best for the auto-enrolment market.
“But, the vast majority of small and micro employers want something simple, efficient and low cost. In fact, many of the top rated schemes aren’t available to small and micro firms.
Paul Budgen, the National Employment Savings Trust’s head of business development, pointed out there are a number of independent quality indicators that advisers can look out for in order to feel confident they are recommending the right scheme to their clients.
“These include things like checking if a scheme is Pension Quality Mark ready, which means the scheme meets industry quality standards on scheme governance, charges and member communications.
“The master trust assurance is another indicator that a scheme meets governance and administration standards set by industry regulators.”
During November, Aviva spoke to 1,865 advisers and paraplanners, finding 54 per cent had seen an increase in demand for auto-enrolment information from small and micro employers, with 16 per cent reporting a significant increase.
Consequently, a third said they saw this as one of the biggest growth opportunities this year. That said, when asked why they were not currently operating in the market, the most common answer was it was not part of their core business at 45 per cent, while 19 per cent of advisers said it was not deemed profitable enough and 14 per cent put it down to a lack of qualifications and expertise.
Last June, Now: Pensions surveyed 248 advisers about auto-enrolment, with 83 per cent saying they intended to continue advising small and micro firms in 2016, despite 38 per cent admitting the auto-enrolment business they had received to date was less than expected.
peter.walker@ft.com
