Auto-enrolment means different things to different advisers. For some, it is an excellent opportunity, while others think it’s not worth getting involved in.
Much has been said about how employers will not be able to access advice since the ban on consultancy charging. The vast numbers of employees, too, will be without advice, most say; they will simply end up in a default fund selected by their employer in conjunction with, if they’re lucky, a financial adviser.
One adviser, however, is turning that idea on its head. Tony Larkins, managing director of Beacon Wealth Management, says almost all the employees in auto-enrolment schemes he has set up opt for individual advice on fund selection. But how does this work in practice?
Mr Larkins works with schemes of 25 to 100 individuals and recently set up a dedicated employee benefit department within Beacon to help focus on auto-enrolment. Working closely with the employer is key to making sure the right messages come through, he says.
“We talk with the employers while we are bidding for the scheme and then we sit down and talk through exactly what they want, the messages that they are trying to get over,” Mr Larkins says. He offers five ordinary and five ethical pension fund options, he adds. “We then work out with the individual employees which is best for them.”
Almost 100 per cent of employees want a personal recommendation on fund choice according to Mr Larkins. This is largely due to the communications in place; he points out that middling performance following the government’s proscribed minimum contributions is unlikely to create a decent retirement pot. Employees are putting in 5 per cent or more already, he adds, “once we have explained to them that the minimum required is never going to be enough for a pension anyway”.
Although employers are not permitted to pass on the cost of advice to employees through charging, providers are allowed to accommodate the costs of individual advice through the product chosen. But it is not about generating profit out of auto-enrolment, Mr Larkins says. “It is not something to make you money but it is the other bits that will come on an ongoing basis,” he says.
For the latest on auto-enrolment providers, read our auto-enrolment survey in the November issue.