Advisers should offer ‘entry level’ propositions: Tpas

Advisers should offer ‘entry level’ propositions: Tpas

Advisers offering consumers an ‘entry level’ retirement proposition would overcome the main barrier to advice, which is that consumers believe it is too expensive, according to the chief executive of The Pensions Advisory Service.

With less than two weeks to go until the new pension freedoms kick in, there are still concerns as to how people will afford to access advice. Michelle Cracknell told FTAdviser that she believes advice is an extension of the guidance and more people, educated in pensions, will seek regulated advice as a consequence.

She said that offering consumers an entry level - which may be simplified advice in the form of a telephone conversation or Skype - would be one way to break down the cost barrier, adding that the client may then evolve to be a long-term client once they see the value of advice.

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“We are seeing more advice models that are dealing with lower value size pots,” stated Ms Cracknell. “Advisers need to offer a access to advise at a feel level that is relative to the size of the pot.

“Compete transparency is needed and this will bring down the barriers, if consumers think that advice is too expensive for them... that is their main barrier.”

Vince Smith-Hughes, head of business development at Prudential, added that advisers must evolve their business models to allow them to charge a relatively low fee. He said that in particular, advisers should think about those people who plan to cash in their pension.

As those people will see tax implications of doing so, Mr Smith-Hughes suggested that advisers could offer them a tax planning service which could show how drawing their money in a different way could be more tax efficient over the next five years.

Paul Harrison, head of business consultancy at Prudential, agreed that an entry level service would allow advisers to charge less as it is not full holistic advice. He added that advisers need to think about less traditional ways of meeting clients and that they should also re-evaluate their business models.

“Advisers only need to do the advice bit. Paraplanners can do the fact find etc. Advisers need to add another menu of charges for those that want pension advice.”

Today, Prudential held its WebEx session for advisers in which Ms Cracknell answered adviser questions on how the guidance guarantee would work in practice. Tpas is offering the telephone service, whereas the Citizens Advice Bureau is delivering the guarantee via face-to-face sessions.

Ms Cracknell told FTAdviser that one of the main concerns advisers had was how qualified the Pension Wise staff would be.

“People who join us have existing pensions knowledge but there is still a learning programme including one week which includes technology and speaking to people. There is then an assessment and someone only has two attempts to pass it.

“It takes four weeks from when someone first joins us to manning the phone.”