Simplified pension adviser Zippen has launched a switching service for IFAs and wealth managers to help them service clients with smaller pots.
The service operates as simplified advice and pension switches can be made for a fee as low as £95 per consolidation, with Zippen taking on full compliance responsibility.
Zippen said the service will be of “huge benefit” to the wealth manager market as typically wealth managers cannot purport to be (or market themselves) as both an independent financial adviser and a simplified adviser.
According to the Financial Conduct Authority the ‘simplified advice’ term has been adopted to describe streamlined advice processes which aim to address straightforward needs of consumers.
The FCA said It is used to mean a limited form of advice, in that it is focused on one or more specific needs and does not involve analysis of the consumer’s circumstances that are not directly relevant to those needs. Simplified advice would result in a specific product recommendation, for example.
We can advise and transact on small pots, which are commercially unviable for the IFA market.Stuart Feast, ZippenStuart Feast, chair of Zippen, said: “This is the nub. You are one or you are the other.
“We are a simplified adviser, which means that we can advise and transact on small pots, which are commercially unviable for the IFA market.
"By the time an independent adviser or wealth manager has obtained all relevant details, quotes and written a suitability report, there is often no commercial sense in dealing with such a case in the first place. However, it might be the small pot of an existing client or a relative of a big client.”
Speaking to FTAdviser, Feast, who has been an IFA for 35 years, said with this service Zippen is taking away the aggravation of consolidation from advisers but also making sure the consumer does not consolidate something that they should not.
Feast added: “I see Zippen as the friend of the IFA, because an IFA cannot commercially justify consolidating small amounts of money.
“Effectively, what we're doing is providing a service that is on a simplified level. So we don't take into account investment performance, for example, but we do take into account charges.”
Feast went on to say that providing a full service costs anywhere from £750-£1,250, which is not profitable on a £5,000 pension value.
“This creates a huge advice gap because, if a standard IFA can't offer a simplified service, what does a firm do in this instance?,” Feast added.
Back in July, trade body Pimfa called on the Financial Conduct Authority to consider its proposals for a “simplified advice” regulatory framework to help firms deliver their services to lower value clients.
Pimfa said advisers will need to be able to “diverge” from current suitability requirements to provide this form of advice on a restricted range of products for clients with “demonstrably simple needs”.
Last year, the FCA calculated there were 15.6mn UK adults with investible assets of £10,000 or more, 37 per cent of which held their assets entirely in cash.
Currently, 4.1mn people are receiving professional financial advice, supplemented by 12.5mn people who are receiving guidance through both commercial and a government provider.
The FCA said last year it wanted to “explore regulatory changes” to help firms provide support on more “straightforward” investment products such as Isa wrappers.
amy.austin@ft.com
