Sadly though, the financial services sector never stands still, and with a chancellor intent on radical pension changes, the satchels will have to be dusted down one more time.
While it only seems like yesterday that advisers were chained to their desks studying for RDR preparation, it was in fact three years ago in preparation for January 2013 and in reality the fundamental changes in the new ‘at retirement’ regime demand a significant reinvestment in skills.
Following the radical changes to the pension regime introduced from April this year, many spectators expected the biggest difficulty with the new climate would be one of reckless abandonment, as pensioners withdrew cash to finance lavish lifestyles and Lamborghinis.
Fortunately, however, the latest data compiled by the ABI shows an average lump sum withdrawal of £15,000 – which would not even buy a set of wheels for that Lamborghini.
At the time that Mr Osborne’s proposals to launch pension freedoms emerged, the raw excitement which filled the retail marketplace and all those approaching retirement was contrasted with great anxiety from an industry unable to quantify a government commitment to provide unlimited free ‘advice’, later adjusted as ‘guidance’.
In response, the government introduced its own ‘Pensions Guidance’ service, described as ‘a free and impartial government service about your defined contribution pension options’. But amid some degree of ridicule, particularly from the regulated adviser sector, the new client-facing service also came with an important disclaimer and the limitation that it ‘won’t recommend any products or tell you what to do with your money’. The best the consumer can hope for is to be told what questions to ask their adviser, and the adviser needs to have the knowledge to respond.
To help advisers keen to be prepared for the potential flows of wealthy pensioners wanting professional, expert advice, the Chartered Insurance Institute launched a new set of examinations in April 2015 under the broad title of ‘Pensions Update Programme’. And many advisers quickly realised that there would be a real duty of care to stay on top of regulatory change and understand the ramifications of all the new pension freedom details.
Together with the regulatory change, client expectations have already been seen as a major driver in pushing those advisers wishing to benefit from the new opportunities to increase their professional standards. A financial planner is now being firmly established as a ‘client-centric profession’ as opposed to an order-taker or product salesman.
The client is paying a fee for advice and they should expect a high level of knowledge and understanding, but despite the fact many advisers invested considerable time in meeting the new RDR qualifications, the need to update knowledge in light of a whole new regime is simply common sense and good practice. Professional standards and quality advice add value to a business, increasing trust and credibility, while at the same time creating a powerful competitor differentiation with attractive brand merit.
It is already acknowledged that specialism such as long-term care and equity release demand additional training and qualifications to provide enhanced and appropriate advice, so why should a completely new pension regime be treated any differently?
While the CII’s R08 is not currently a regulatory requirement, it must be recognized as a wholly necessary commitment by any adviser keen to observe quality standards and put the customer first. There is a world of difference between the adviser who does the bare minimum to satisfy the regulatory rule book and the one who bases his development on the needs of their client.
Simon Hewitt is wealth propositions manager of Personal Touch Financial Services
