Incentives may go some way to boost take up in advice

  • What the government is proposing over the advice allowance
  • how the advice allowance will work
  • what could change the landscape for pensions advice
  • What the government is proposing over the advice allowance
  • how the advice allowance will work
  • what could change the landscape for pensions advice
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CPD
Approx.30min
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CPD
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Incentives may go some way to boost take up in advice

However, are three lots of £1,000 available for advice over perhaps a 10-15 year period on the run-up to and into retirement, enough to bring more regulated advisers into the market for non-high net worth customers?

As the consultation paper indicates, any retirement planning financial advice event, combined with its associated administration, would amount to at least nine hours of an adviser’s time at an average of £150 per hour, leaving a bill of £1,350, so there will be a shortfall of perhaps £350 for each face-to-face advice session.

I believe that, welcome though these tax stimuli are to seek financial advice, there also needs to be a fundamental shift in financial education around retirement planning. The focus needs to be put much more on defining retirement outcomes, and then putting plans in place to realise them.

There still remains a massive and fundamental gap in individuals’ understanding of what and when they need to save, and indeed, how much they should be targeting to live on in retirement. To date scheme provision has placed too high a focus on setting a contribution structure, investment options (linked to risk profile) and then deluging customers with verbose and complex product literature, which is rarely read and even more rarely understood. It would be much better to focus on retirement outcomes – the level of real income that the individual wants and can expect, given current status indicators, in retirement.

Advisers looking to get (back) into retirement advice or increase focus in this area, need to be encouraging providers to provide online tools to stimulate outcomes-focused retirement planning. For without this sense of reality, policyholders will continue to lack the engagement in the gritty problem of retirement income building. Retirement provision can appear a fantastically unreal mountain to climb, so why bother cutting through the undergrowth in the foot hills?

They also need to be encouraging providers to develop automated systems that nudge the customer in the right direction. So if the portfolio a customer has selected is trending downwards (or upwards) that might be the trigger for a push notification via the provider’s mobile app to tell you that you might want to talk to your adviser with a view to adjusting your portfolio and/or increasing your regular contributions.

For an idea of how outcomes-based thinking plays out in the workplace pensions world you can go to a Hymans Robertson video on their analytics-driven Guided Outcomes offering for employer schemes. Imagine what you could do with a regular business intelligence-led report that shows which of your customers are likely to fail to reach their pre-defined retirement income target, for example.

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