Where advisers can add value to a corporate client

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NEST
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Supported by
NEST
Where advisers can add value to a corporate client

The government’s auto-enrolment scheme was launched to help the UK population start saving into a pension pot through their employer.

The onus on companies to ensure they implement a pension scheme which will provide for workers of all ages brought with it an opportunity for advisers as well, should they want it.

The role of the adviser is often to work with businesses to help them navigate the workplace pensions available to them and find the best value scheme.

With many companies reliant on financial advisers to meet their workplace pension requirements, what can advisers offer to corporate clients in particular to demonstrate they are adding value?

It’s the adviser’s role to think about the things employers wouldn’t think about with a workplace pension.Andy Beswick

The benefits to a corporate firm offering a competitive workplace pension pot are numerous.

Neil Johnson, senior partner at True Potential, explains: “Some businesses might view workplace pensions, and auto-enrolment in particular, as a hoop they have to jump through.

“But it’s actually an excellent way to attract and retain the best talent if they have a service that employees value and can engage with.” 

Where advisers can really add value to corporate clients is by simplifying the process, he points out, ensuring that the client is complying with regulations and that their employees are engaged. 

Easing the burden

“It’s the adviser’s role to think about the things employers wouldn’t think about with a workplace pension,” suggests Andy Beswick, managing director of business solutions at Aviva. 

This might mean taking into consideration and asking the following questions:

  • Does the provider integrate with the payroll software?
  • Will the employees have access to pension freedoms?
  • And can they invest in alternative funds to the default fund?

“Supporting the auto-enrolment scheme launch by operating engagement services and taking on employee queries can ease the burden that an employer might face without an adviser to hand,” Mr Beswick continues.

“Additionally, offering ongoing support through governance reviews and additional engagement sessions can be of real value to the employer. It highlights the key aspects of the workplace pension and ensures it remains fit for purpose.”

Some companies may prefer more hand-holding from their adviser as they guide them through the range of pensions available to them and come to select a scheme.

Other large companies may be able to compare the available schemes on offer but beyond a simple comparison the decision may become more complex, and this is where an adviser could come in.

NEST's senior business development manager Robin Armer suggests clients may want to know what the difference is between trust-based pensions, or contract based pensions and master trusts and understand which is the most suitable option to meet the needs of their workforce.

He says: “Once this has been narrowed down, employers will often seek advice on the most suitable default investment options and investment fund ranges for their workforce.”

Adding real value

Mr Armer points out this is where corporate clients may rely on advisers’ expertise to help them understand why a particular fund is appropriate. 

“Comparing charges and past performance is fairly straightforward but demonstrating qualitative knowledge and reasoning around a fund’s objectives, risk levels and value for money is where you’ll really be adding value,” he notes.

“A further valued service is to provide the employer with a clear and structured ‘reason why’ letter showing the rationale behind the selection of a particular provider. 

“This ensures that the employer will always be able to demonstrate that they sought expert advice to help make the decision and that a thorough assessment has taken place to select a provider that meets stated objectives.”

He points out this may prove important if an employer is ever challenged by a worker over the decision they made or the reasoning for that choice – in other words, it is proof of their value.

There is clearly an opportunity for advisers to add value at the initial stage of the process when a company is selecting a workplace scheme. 

But the opportunity does not stop there as it is likely a company will continue to review the market and its own workplace pension on an ongoing basis.

Martin Olive, strategic partnership manager at Now: Pensions, believes the time is now for advisers to prove their value.

He explains: “For financial advisers, this legislation seemed a great opportunity as there would be thousands of employers in the UK that needed to set up a workplace pension scheme for the first time, or introduce a regulated and compliant workplace pension scheme to replace their existing non-compliant one.”

Scheme selection, employee presentations and transfer clinics are all areas that advisers can get involved in.Graham Peacock

But he says in reality it was a different story when many advisers decided auto-enrolment could not be profitable for them. 

“This led to many employers having to source their own scheme or enlist the help of a payroll bureau or accountant, as a cheap and efficient way of becoming compliant,” he says.

“However, this meant many employers choosing a workplace pension provider based on the cheapest and easiest solution with little thought being given to what workplace pensions should be about – great member outcomes.”

Reviewing schemes

Mr Olive continues: “Many employers will wish to review their schemes and advisers have more time to think about their approach.” 

But with this process comes difficult questions which employers will need to ask themselves:

  • Is the master trust I selected transparent and financially sound? I chose it because it was free to the employer - will it always be so? Can it afford to be so?
  • Is the GPP scheme I chose value for money for me and my employees? Do members need all those funds – who is advising them? It’s not a financial adviser. Are they making awful fund decisions? Are they just confused and thus not engaged?
  • Who is offering my employees a pension pot consolidation service? Using an agreed process with the employer we are seeing advisers efficiently obtain information about members’ existing pots and delivering consolidation advice in the workplace through modest facilitated charging from the transferred funds. Employers see this as a real added value service.
  • Am I up to date with workplace pension regulations? What am I supposed to be doing with regards to reviewing the appropriateness of my scheme?

This suggests the opportunities for advisers to add value are not only many but they are at every stage of a company’s implementation and maintenance of a workplace pension.

Graham Peacock, managing director of Salvus Master Trust, confirms: “Scheme selection, employee presentations and transfer clinics are all areas that advisers can get involved in.

"There is also scope for advisers to guide employers with the level of employee and employer EE/ER contributions, although currently we are seeing the bulk of new employers selecting 1+1 per cent (the minimum level of contribution). 

“However, transfers and consolidation are, for me, the real areas of interest.”

He asserts: “Advisers can add huge value guiding employees through this complex area. It makes sense to start by advising the directors of the employer on how auto-enrolment impacts on their pension planning.”

eleanor.duncan@ft.com