As an former adviser, now in my insurance company ‘ivory tower’, I feel we are going through a paradigm shift in the way that corporate advice will be managed.
I could have called this article, ‘Now the pensions party is over’, as clearly the historic and ongoing changes in adviser remuneration for this benefit are driving change.
Change is happening not only at adviser consolidation levels, but also in the offer being made to corporate clients. If I am honest, I have no concrete evidence change will happen and so this is my personal perception of what could happen and where will it leave us. But these feelings I sometimes get have always helped me future-proof the businesses for which I have worked.
Any corporate adviser who hasn’t yet worked out a clear strategy for pensions revenue replacement and alternative remuneration growth is, in my view, in peril if they do nothing.
The old adage, ‘If you always do what you always did you will always get what you have always got’ comes to mind as this is simply not the case, however good you are!
So what has changed?
The type of pensions arena that a corporate adviser has been in will determine the extent of the revenue loss. For example, fewer defined benefit schemes, with a limited future - for example, closed to new entrants or simply closed, means that both actuarial and fee based administration work will dry up.
The bastion of public sector may remain but at some point the knives will be out as even the career averaging changes have left a large residual public sector cost.
For defined contribution (DC) schemes, a combination of the removal of both indemnity commission and renewal commission means that fee based work is the only option. Moving clients from the ‘hidden remuneration’ of commissions to fee-based work is one of the most challenging conversations that DC advisers are having.
How many days on site would you get where, for example, a £20,000 annual, on-going commission needs to be replaced by fee based work? Can the pensions industry really resource this and are clients really willing to pay fees which may not have appeared in budgets before? Even if the client agrees, their demands will increase as the visibility of the fee spend is now profiled, rather than hidden within the pension illustration provided to the employee.
For SMEs and high net worth individuals, the historical popularity of Ssas/EPP and more latterly Sipps have provided a great niche area with some amazing business benefits, for example, the ability to buy commercial property.
While we have lost the commission element on pensions, even the fee based work on things such as Sipps may be under threat if the consultation over the combined Isa/pension tax regime is merged, especially if this is contribution limited.