Pension Dashboard  

Pension dashboard could cut advice cost by 25%

Pension dashboard could cut advice cost by 25%

A comprehensive pension dashboard could cut the cost of financial advice by up to 25 per cent by freeing advisers from the time-consuming business of tracking down all their clients' pension pots.

That is the view of Ian McKenna, an independent member of the government-appointed pensions dashboard steering group.

Mr McKenna, who is also director of fintech consultancy F&TRC, told FTAdviser a fully-functioning pension dashboard would allow advisers to view all their members' pension pots at the click of a button.

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This, he said, would free up huge amounts of time to focus on financial planning rather than administration.

"Right now, any adviser will tell you an awful lot of their time is spent tracking down information, [of their clients' pensions] and making sure they understand all the small print before making a recommendation," Mr McKenna said.

He said a good grasp of the small print, such as whether or not the contract included a guaranteed annuity rate, could mean the "difference between good advice and bad advice".

"A dashboard will make it far easier to harvest the information. You're talking about taking a significant amount of advisers' time out for advice. One might see a saving of 20 to 25 per cent - or more," he said.

He pointed out, though, that it would be up to advisers whether or not they passed the savings on to their clients.

He also argued for a pensions dashboard to really revolutionise the cost of advice, it would require every pension scheme in the country - including the tens of thousands of workplace defined benefit and defined contribution schemes, many of which have exclusively paper-based records - to feed comprehensive information into the dashboard.

This would require the government to make participation compulsory, something he and fellow independent member of the dashboard steering group Margaret Snowdon are pushing for.

Currently participation is entirely voluntary, but both Mr McKenna and Ms Snowdon told FTAdviser they are confident the government will introduce compulsion by 2021.

FTAdviser put Mr McKenna's claims to a number of financial advisers. Some agreed a comprehensive dashboard could radically cut costs, while others dismissed his claims as overblown.

Dhawal Chandan, a chartered financial planner and director of Just Financial Group, said the dashboard would "definitely" reduce time spent on administration, and therefore slash costs.

"As a firm currently, we spend at least 20 to 30 per cent of our administration time on every pension case on chasing providers for up-to-date valuations and scheme information.

"If this information can be availed in real-time through the dashboard it would not only reduce the cost of providing advice but also speed up the process and make it more efficient."

Steven Robinson, director of Clarke Robinson & Co, said to achieve savings of 20 to 25 per cent, the information would have to be extremely comprehensive.

He said it would have to include "full details of old policies including guaranteed rates, with-profit bonus details, guaranteed minimum pension details, all charges etc."