Personal PensionJun 18 2014

Auto-enrolment is the tip of the iceberg

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All change can be unsettling, and a brand new product area in the market is no exception. However, the staging dates for many large firms have already passed and therefore advisers who are involved in AE are now able to shed light with some accuracy on how it works in practical terms and the advantages and challenges they may have experienced. If you are one of the advisers who are yet to get involved, do not worry that you have missed the boat; there are over 38,000 small and medium-sized companies with staging dates still due in 2014.

Opportunities

So, why does this present such a huge opportunity? Well, in short, meeting the new requirements for workplace pensions is going to be extremely onerous for almost all employers. With 33 new regulations to adhere to, there is much to be done, and putting in place a pension scheme is only a very small part of the equation.

Some employers will assume this is something that they can do themselves, something that their HR function will simply pick up – but little do they know what is in store. To highlight the complexities, consider an average HR manager and the following issues:

- Is he a pension’s expert? Does he understand the legislation? If there is an existing scheme, can he deal with providers?

- Does he have a spare 103 days (this is the estimated time needed to run AE in-house)?

- Does he know where to begin with staging dates, project phases or interpreting the rules?

- Does he know who is eligible? Can he manage the changes (potentially each and every time payroll is run), does he know who to enrol, how to deal with opt-ins and opt-outs?

- Does he know how to communicate with employees about what is happening?

- Does he understand contribution tiering, retirement options, salary sacrifice, postponement and so on?

So, with all this in mind, it is pretty clear where an adviser can add real value, but this is only the start.

While AE presents a huge opportunity for advisers to engage with corporate clients, I believe that this is merely the tip of the iceberg – the ‘ticket to the game’ if you will. For once you have solved this very real headache (that is, AE), you have opened the door to two new potential avenues.

First, there is the business as a whole. Arranging an AE scheme will give you access to business owners and directors, and therefore the opportunity to help them with an overall analysis of the company’s needs for deeper financial solutions. While this might raise a number of the points you would expect – such as key person insurance – more complex aspects are also likely to come to the fore when you start to fully analyse areas such as flexible worker benefit schemes.

Second, do not underestimate the importance of your access to the workforce as individuals. Again, I do not think I can stress the size of this opportunity enough; every single business in the UK who employs one or more people has to put a solution in place. The knock-on effect of this is that you potentially have access to the workforce of all those employers you serve.

I would not for a moment suggest that this is going to become an all-you-can-advise client buffet for each person who puts an AE scheme in place, but there will certainly be a number of people in every place of work who do not currently have an adviser – but do need one. Conducting this initial piece of business for them, and doing it well, will put you in pole position to take on any clients who are up for grabs.

Needs

While eight out of 10 employees might only have standard financial needs, these are eight new clients contributing to the bottom line of your business. In addition, you also need to consider the two out of 10 who will become high-flyers, business owners in their own right, the heirs of substantial estates or even lottery winners. AE is an adviser’s opportunity to place himself at the forefront of each of these worker’s minds and become the obvious choice when they need future advice following a change in circumstance.

Without straying into an area that is not my forte, it is clear that our old friend workplace marketing has a role to play here.

While AE is the responsibility of employers, it does, of course, affect employees, many of whom may find themselves saving for retirement for the very first time. This may in turn be the catalyst for thinking about other financial requirements they may have – mortgages, life insurance and even savings.

Presence is the key – that is, having your presence, your brand, in front of the workforce. Right from the moment you are introduced into the business, it is good practice to get your brand out there – consider how the workforce engages with communications relating to the company they work for and make sure you have a presence there.

Display

Staff rooms and notice boards present the ideal place to get posters and flyers displayed. What about an employee extranet, or staff web pages? Can you arrange for a series of workshops or presentations to staff as a whole? Is there a staff newsletter? If not, could you introduce one? And, of course, make sure you do not neglect probably the biggest one – social media. Can you set up a staff LinkedIn group, for example?

Remember the bigger picture – this is about establishing your practice as the adviser of choice to both owners and workers in many small businesses. Not to mention the obvious benefits of working with accountancy practices to maximise new business opportunities. A genuine once-in-a-career opportunity.

I know that not every adviser wants to be involved in the AE market and, of course, that is perfectly valid. However, before you dismiss AE out of hand, I would urge you to give careful consideration to the other business opportunities you may be missing. Getting tickets to the game is only the first step; the real benefits might only reveal themselves well into the second half.

David Golder is client proposition director of SimplyBiz

Key points

- Auto-enrolment should represent a market that is growing exponentially.

- While AE presents a huge opportunity for advisers to engage with corporate clients, this is merely the tip of the iceberg.

- Right from the moment you are introduced into the business, it is good practice to get your brand out there.