Financial advisers are at the dawn of a new era in which their services become even more important in delivering better outcomes for clients following the new pension freedoms.
This is the view of Stephen Bozeman, senior product strategist in the global retirement strategy group at BlackRock, who, along with John Stopford, co-head of multi-asset at Investec Asset Management and Ian Smith, chartered financial planner, Central Financial Planning, spoke at a panel session on the reassessment of risk following the pension changes at the second FT Adviser Freedoms Forum event, held at the Crowne Plaza Hotel in Birmingham.
He said: “I think the market here is moving in the same direction as in the US, where individuals have much more freedom around what they can do, and the reality is that the majority have no idea what to do. They need to be told what to do.”
However, with opportunity comes risk, according to fellow panel member David Trenner, technical director at Intelligent Pensions, who spoke of the need to manage clients’ expectations following the implementation of the pension freedoms.
He said: “I think sometimes product providers and politicians think people give bad advice. What happens is that we give advice, we take into account the individual’s needs, we tailor our advice to their requirements, but unfortunately we are not crystal ball gazers, and our friends at the Financial Ombudsman Service expect us to crystal ball gaze.”
Another area for concern raised by Mike Morrison, head of platform technical at AJ Bell is that of clients transfering from defined benefit to defined contribution schemes in order for them to take advantage of the new DC flexibilities.
Echoing these concerns, Chris Daems of Principal Financial Solutions said his firm would refuse to offer such a service because of the risks involved. David Geale, head of investment policy at the FCA, said the regulator was more concerned about cases where detriment could occur as a result of a transfer – though instances where the transfer might be in the client’s interest were being looked into.
The topic of the evolution of at retirement products is one that provoked a flurry of responses during the final panel session of the event in Birmingham.
According to Ros Altmann, the government’s business champion for older workers, those at retirement age will be likely to do nothing when the pension changes come into effect because people are working longer, so there is less of a need to secure a pension income.
Mr Geale said: “It is early days. There seems to be variations, but not anything particularly new, innovative or exciting – which is perhaps what we all expected. I think we would like to see the kinds of products that service consumers, but we do not have a particular picture in mind of what we want to see.
“What we do want is providers to start with customers’ needs in mind. Think about what they would want before developing new products.”