April is the cruellest month – or so it would seem for advisers with large books of corporate or private personal pension clients. On 6 April 2016 trail commission will be turned off once and for all under the adviser charging rules for advisers who had set up corporate defined contribution pension schemes or individual pensions.
While no new trail commission-based products have been allowed to be sold on a commission basis since 2012, existing products continued to pay commission until now. It is the final stroke in the long hand of the RDR. For the largest employee benefit consulting firms, which have always operated on a fee-only basis, April may prove uneventful.
But even the mid-tier consultants will find a significant chunk of their recurring income evaporating overnight, and all firms that had sold pre-2012 personal pensions will be hit. So what can pension advisers do to retain income streams on legacy pension products?
First, there is no doubt that maintaining ongoing income for personal pensions, group personal pension or group Sipp business will become more challenging going forward. The providers have widely used the new rules as an opportunity to strengthen their relationship with clients, reassuring them that they will continue to be serviced directly whatever happens to their relationship with their adviser.
Here comes the first objection from the client, “Why do I still need my adviser at all, particularly when I now have to pay them directly?”
The answer has to be service. If the client values service they will acknowledge the need to pay for it.
The trouble is, if they haven’t been receiving much in the way of service recently, they will struggle to recognise the benefit.
Firms who have been demonstrating high service standards already are much better placed to retain existing clients and, perhaps, pick up new ones for an ongoing governance role on the pension arrangements. So what ongoing governance services are clients looking for, particularly for group corporate pensions?
Yes, providers will automatically communicate. But default communications are basic. Advisers can help a company get the most out of workplace pension arrangements – not just tick a box.
If staff appreciate the value of their package they will appreciate their employer more. Good communication to existing and new members is vital in this process.
Online information access is a must-have too – a good adviser can help in getting this right.
Default funds and ranges
Forward-thinking firms will have set up governance committees to review fund options, but for most, this vital ongoing monitoring task is left to drift. Yes, providers will claim to offer some form of in-house fund selection governance, but that is no replacement for truly independent fund analysis to ensure ranges remain fit for purpose. Default funds are critical. Ensuring they are performing the required job needs expert, specialist support – including formal recommendations.
Value for money
Advisers can carry out regular market reviews to ensure the product continues to provide an all-round service that offers value for money as the market evolves.