Your IndustryNov 17 2015

Half of IFAs reject pensions savers with less than £50k

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Half of IFAs reject pensions savers with less than £50k

New research from AJ Bell has shown that 50 per cent of advisers are finding it difficult to advise clients on the new pension freedoms if they have less than £50,000 in their pension pot.

Almost one in five found it difficult to advise clients on pension freedoms if they have less than £100,000 and for 5 per cent of respondents that figure increases to £150,000.

Over three quarters (78 per cent) of the 125 advisers questioned said they have had to turn clients away because it is uneconomical to give them financial advice.

The main barriers getting in the way of this provision of advice are the costs and the liabilities associated with being a financial adviser.

An overwhelming majority (77 per cent) said the main barrier was the regulatory costs associated with giving advice on smaller pots, while 40 per cent said business costs were a prohibitive factor and a quarter mentioned the regulatory framework as a barrier.

Closely linked to regulation is the liability advisers have to take on when giving advice, something seen as a barrier to providing advice by just over half (51 per cent) of advisers.

Billy Mackay, marketing director at AJ Bell, stated the findings clearly illustrate the problems sitting at the core of the advice gap in the UK.

He said: “In our discussions with advisers, many felt that they are paying for the mistakes of a small minority of advisers from the past.

“The costs associated with this are naturally reflected in the fees advisers have to charge today to run a commercial business and the result is that many consumers are being priced out of receiving good quality financial advice at a time when they need it the most.”

He added that the Treasury and Financial Conduct Authority are now looking to tackle these problems via the Financial Advice Market Review.

“The pension freedoms were a hugely progressive change for consumers and the FAMR could be equally successful in improving customer outcomes if it can achieve its stated objective of facilitating greater access to advice,” said Mr Mackay.

Steven Farrall, partner at Williams Farrell Woodward, stated that advisers cannot easily give ‘compliant’ pensions freedoms advice to clients with small pots; but most still do.

“One, because it is better we do it than it is left to the various government sponsored, taxpayer funded, but fairly useless bureaucracies. And two, because it is a marketing opportunity for us, as you never know what else may come from it.”

However, Murphy Wealth partner Adrian Murphy said it would be rare for them to speak to a new client about pension advice with less than £250,000.