Key Retirement to ditch pensions advice business

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Key Retirement to ditch pensions advice business

Key Retirement is to scrap its pensions advice arm after clients did not see the service as good value.

The retirement income specialist made the decision to set up a pensions advice arm before the freedoms were announced in the 2014 Budget.

However, the firm’s technical director Dean Mirfin told FTAdviser that the service will close because many clients are unwilling to pay for the advice.

He said the company’s core customers – which have pots between £50,000 and £100,000 – often end up with an annuity, which can be set up without advice anyway.

“We came to the conclusion that until consumers are prepared to pay for the advice and can see the value, it just doesn’t work,” Mr Mirfin stated.

“If you look at the Financial Advice Market Review and the ‘advice gap’, we think a lot of customers don’t necessarily need advice, they just need a process of getting the right outcome, which is different to full-blown advice.”

He said that drawdown is not a viable option for most of the firm’s clients, because their view on risk is so low that drawdown could cause them to lose money.

The company, which now employs more than 300 people, will therefore return to its previous model, which is non-advised and annuity focused.

Mr Mirfin said it was disappointing that clients were unwilling to pay for pensions advice, but that is wasn’t surprising. “If clients are told at the end of the advice process that what they need is an annuity, then they don’t see the value in the advice they have paid for.

“We are dealing in that lower pot value, where income is mostly what the customers need.”

He also commented that most customers have a clear idea of what they want, despite the freedoms, with the vast majority seeking guaranteed income.

The three Key Retirement pensions advisers who work for the advice arm are currently being put through a consultation process to establish if there is another position for them in the business.

Mr Mirfin said, however, that the change will not happen overnight.

“Any clients who are at any stage at all in the advice process, or who were expecting advice, will still receive that,” he explained, adding that the change is a gradual process that will start by altering the firm’s marketing messages.

He added that customers who come to the firm in the future who need advice will be handed to a partner firm.

“We won’t abandon people,” he said. “No one will be left without whatever support they need, it’s more that they won’t be delivering that advice going forward.”