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Advice gap between IFAs and Pension Wise

This article is part of
Guide to Pension Wise and Retirement Guidance

Most advisers think Pension Wise will not benefit their businesses, says Mike Morrison, head of platform technical at AJ Bell.

At a recent round of AJ Bell seminars attended by about 650 advisers, Mr Morrison says only one attendee confirming they thought they would benefit from the proposed service.

Michelle Cracknell, chief executive of The Pensions Advisory Service, stresses the service will provide guidance and is not designed to replicate professional financial advice.

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She says it will provide tailored information to consumers on the options available to them, but, unlike financial advice, it will not recommend specific products or providers. Ms Cracknell says the FCA is in parallel looking to encourage the development of affordable models of advice.

The Money Advice Service has also developed an adviser directory which will complement the guidance service and be used to make future advise referrals, she adds.

Pension Wise was designed to fill a gap between no advice and IFAs, says Darren Philp, director of policy and market engagement at The People’s Pension.

People who use Pension Wise should have a better understanding of the pros and cons of each option available to them, and some idea of their preferred route, Mr Philp points out.

Some of these routes will only be available to those who choose to engage a professional adviser, and Mr Philp says some savers’ circumstances will be more complex than can be catered for by Pension Wise.

He says: “We strongly believe that there will be a growing awareness of the role IFAs play in providing more in-depth expertise and personalised recommendations.

“However, the price gap between free guidance and regulated advice will remain a significant disincentive for some savers to engage an adviser.”

So, in terms of whether advisers will benefit from Pension Wise, The People’s Pension’s Mr Philp says it is simply too early to say whether advisers will win or lose from these reforms. However, he says it is possible that Pension Wise will normalise advice for personal finance.

Mr Philp says: “People engage the services of professionals (estate agents, solicitors, plumbers for example) at many times in their lives and for many different reasons. There is no reason why retirement financial planning should be different.”

Ultimately, Tpas’ Ms Cracknell agrees her service could prove a positive development for advisers.

Ms Cracknell says the users of the guidance offered by Pension Wise will be given a good sense of the value of advice and will be better equipped for a session with an advisor.

She says they will be signposted to the Money Advice Service directory to find a local adviser, which is able and appropriately regulated deal with their circumstances and needs.

Cost of advice

Karen Barrett, chief executive of the adviser search engine, says the most common reason people search for an adviser is to seek advice on pensions. She says Unbiased has seen an increase in traffic to the site by some 15 per cent since the pension freedoms were announced.