Providers should give their consumers advice on what to do with their pension money in retirement, a robo-adviser has said.
eVestor chief executive Anthony Morrow said guidance currently provided free of charge to those at retirement was an “unnecessary distraction”, which did not help them make informed decisions.
He said retirement planning was too complex for people to make decisions on their own and the danger was it was those with the least experience in financial planning that were shut out from advice.
Mr Morrow said: “The idea of having to have guidance is an unnecessary one. That is there to bridge a gap to provide people who can’t afford advice with a second class level of that because insurers can’t be [bothered] taking on the risk but are quite happy to retain the assets.”
“People regardless of their wealth should have access to advice. Insurers are quite happy to have call centres to provide non advice why not just train people up. There is no excuse to them not doing it,” he said.
To prevent mis-selling insurers would have to abide by the same rules as other ‘restricted advisers’, including being clear they are not advising on the whole of market.
Mr Morrow said there were not enough advisers in the marketplace following the Retail Distribution Review (RDR) to provide for the entire market and help close the so-called advice gap, the term widely coined for the lack of consumer access to advice.
“To think the advice gap is going to be solved by the advisers is ambitious. There are not enough advisers and they are all busy providing advice to consumers who can pay fees,” he said.
His comments came after provider Prudential told MPs in recent weeks there should be a new form of guidance which would allow for a personal recommendation to be made.
The government’s pension reforms in 2015 opened up the retirement income market for many people for the first time.
In order to mitigate the impact of the rule change the government put in place free at-retirement guidance service Pension Wise, which is mainly carried out by The Pension Advisory Service (Tpas).
Consumers also have access to free impartial guidance from the Money Advice Service (Mas).
However, both organisations are not allowed to give customers clear directions on what to do, as giving a personal recommendation by definition steers towards the realm of advice, which carries full liability and offers the associated access to regulatory recourse, such as the Financial Services Compensation Scheme and the Financial Ombudsman Service.
Guidance leaves responsibility and liability largely with the consumer, though those providing the guidance must ensure it is fair and not misleading.
The provider warned the set up meant people were falling through the cracks as “those who most need the support are often the ones who do not get it (they do not need and cannot afford advice but pure guidance is not enough for them).”