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Pension consolidators - a threat to the advice industry

Pension consolidators - a threat to the advice industry

The advice market is facing a growing threat from pension consolidators who are “aggressively” advertising to potential adviser clients, commentators have warned.

Customers approaching retirement are being pushed towards consolidators to sort out their scattered pension assets — a step which otherwise might trigger the start of a consumer’s advice journey.

Dan Mahoney, director at consultancy Alpha FMC, said: “The battle is going to be fought over clients who are around 40 to 50 years old. A lot of advisers due to capacity constraints have focused on ‘peak accumulators’ who are further on in the pathway to retirement.

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“But pension consolidators are aggressively advertising to these future clients. And if they have done that job for someone who is 40 to 50 years, then the assets are in the same place and that consolidator can nurture the clients or partner with providers for retirement options.”

Peter Chadborn, director at Plan Money, agreed. He said many people in this age group were prompted to seek financial advice for the first time because they had amassed a number of different pension plans and needed to make sense of them all.

If there were a number of pension consolidators appearing on their radar, seemingly making the process easy, then there was “certainly a risk” that the traditional advice route would be overlooked, he added.

Mahoney said to stay in the game, advisers needed to challenge themselves about the “faff” they created for people in the onboarding process, particularly in comparison to more digitally-focused challenger firms.

He added: “This is not expensive to apply to a business. Advisers need to offer a friction free experience.”

Pension consolidators have been a growing part of the market in recent years as consumers look to bring all their pension schemes together.

Among the most successful is PensionBee — an online consolidator currently preparing to float on the stock exchange later this year after a “strong performance” in 2020.

The firm is aiming to qualify for the London Stock Exchange’s high-growth segment of listed companies, meaning it has an expected market capitalisation of £300m or more.

It also joined the Association of British Insurers as the trade body looked to reflect the “changing nature of the long-term savings market” and welcome businesses that are helping customers consolidate pots.

Heather Hopkins, managing director at NextWealth, said advisers needed to “continue to beat the drum about the value of financial planning” in order to maintain a hold on their future client bank.

She added: “Most consumers think financial advisers are a route to access financial products, and there are many cheaper and faster ways to access products. Financial planning is about helping people realise their goals.”

But a more significant shake up of advisers’ propositions is necessary to tackle the changing marketplace, according to Martin Bamford, head of client education at Informed Choice.

Bamford said advisers would need to position their services to either appeal to the “oldest old in society, with later life and care fees planning on the menu” or develop a proposition better suited to wealthy accumulators.