At-retirement reforms present a “tremendous opportunity” for financial advisers, but only if they update their systems and processes to prepare properly, according to two independent experts.
Speaking this morning at Distribution Technology’s annual conference, the government’s business champion for older workers Ros Altmann said advisers should not underestimate the scale of the change from 6 April, which fundamentally impacts every aspect of pensions.
“This is a tremendous opportunity for IFAs, as the guidance service will highlight the role of advice. It cannot deal with investment risks and will show the gaps in planning and timing that need professional help.”
She added that the changes to tax rules were neither simple or straightforward, but crucial to make sure retiring clients make the most of their savings.
Reiterating points she made at an FTAdviser conference last week, Ms Altmann argued those aged 55 plus should transfer Isa savings into pensions, along with downsizing their house, as with new inheritance tax rules the pension pot “should be the last money you spend”.
Her comments were backed by Simon New, director of wealth and asset management at EY, however he said that through remediation work with various advisory firms, he has seen gaps in profiling, a lack of evidence in investor experience and gaps in terms of personalisation.
“There has been strong progress across the industry, but too many processes are still manual, documentation is either missing or hard to find, and there is a lack of evidence or rationale for product and proposition switching.”
These points were highlighted as part of an address on suitability and conduct risk, in which Mr New also noted that demonstrating value, ensuring consistency of advice and fee transparency should be at the forefront of advisers minds.
He added that in order to make the most of the pension freedoms, it was important that advisers embraced ‘digitisation’ of their communications, automation of processes to improve efficiency and reduce errors, while still ensuring human interaction was still vital.
Ms Altmann also took the opportunity to opine on the new retirement income options available from April, stating that annuities still have their place, but probably more in later life and with individual underwriting.
“However, it’s worth remembering that you’ll be locking into today’s interest rates. There’s also no growth, liquidity, inflation help, care funding or legacy planning.”
She made the comparison of only using an annuity to just insuring your house for fire - effectively covering one risk out of many.
“Not a lot has happened with new product development so far... I’d like to see something with a combination of a fixed-term drawdown, say 25 years, with a portion of the pot saved for a later life deferred annuity.”
Ms Altmann also said she was waiting for lifetime pension accounts to take off, with providers offering whole of life solutions with growth and retirement income combined.
peter.walker@ft.com
