It’s been a little over three months since the introduction of the government’s guidance guarantee for the newly-retired and the launch of the Pension Wise service. How has it been for you?
I ask the question with some trepidation because, let’s be honest, the service itself wasn’t really set up with advisers in mind; it certainly wasn’t developed as the first stage in moving retirees into developing new relationships with advisers who could advise and recommend these individuals through their retirement.
It wasn’t established as this ‘Base Camp One’ for those who had never sought adviser help before but, to my mind, that doesn’t mean that it can’t be such an entry-level opportunity, or that there won’t be significant numbers of potential clients who would appreciate moving on to the structure and approach full advice offers.
That said, according to the latest soundings from the Association of Professional Financial Advisers (APFA), Pension Wise isn’t providing a glut of clients for advisers and it is calling for the adviser contribution to its costs to be dropped further.
While I am sympathetic to the sentiment, it is incredibly early days and let’s be honest, while there will be a number of advisers actively interested in developing relationships with those individuals whose pension pots may not be of the greatest value, we are probably not talking about significant numbers of traditional financial advisers.
However, for those actively involved in the provision of later life advice I believe that guidance represents an untapped opportunity which, if executed correctly, could deliver a large number of new clients with varying later life advice needs, plus of course, the referrals that naturally come with any satisfied individual.
The first point is to be comfortable with what guidance represents and offers – it is certainly not a bells and whistle approach to delivering information that is going to send a retiree away completely clued-up on all their options and where they should be going next.
As previous pensions minister, Steve Webb, explicitly outlined this is the provision of a bare minimum of information; indeed, we are led to believe there are some glaring omissions from the content of the guidance including, rather notably, any discussion of property wealth and how it might be utilised.
Instead, this is much more about outlining what the individual has at their disposal, in terms of their pension pot, and (from what I can gather) little else.
It will be a run down of what the pension freedoms mean for these individuals and how they might be utilised but this is a long way away from tailored advice which delivers a clear route-map and recommendations for what to do next.
Even though APFA believe the push-through from Pension Wise to full regulated financial advice isn’t happening yet, my belief is that very few retirees – who have not received any advice prior to this – will be coming away from their meetings and conversations 100% clear on what the best option is for them.
Now, for advisers interested in these clients, the important part is developing a proposition which takes these individuals on the next stage of the client journey.
And to this end, there may need to be an approach adopted which borders on ‘speculate to accumulate’.
By that I mean advisers are probably going to have to offer up some ‘free’ time and advice in order to move the client on – this means taking the information provided by Pension Wise and making it much more specific, it means highlighting options and areas which guidance will not have covered, it will mean a discussion of pension options but also offering some clear idea of what that may mean for tax burdens and benefit entitlement.
All in all, it should be about making the move away from Base Camp One that much easier and providing the client with advice and recommendations on what they could do next.
And this should be offered free of charge because a client leaving Pension Wise may well recognise their need for financial advice but they may not yet be in the headspace which means they are willing to pay for it.
After this initial session however, the adviser will be able to make clear that any next steps come with a charge and, again a suggestion, you should be tailoring your charging structure not to a seasoned client fully bought into their advice wants and needs, but someone who is just getting to grips with the process and it what benefits it actually brings them.
This is the reason why our Academy is suggesting a ‘Guidance +’ approach which is marketed effectively to those coming out of Pension Wise, and presents a seamless transition rather than a rather clunky and unsatisfying move.
Advisers wanting to make a move into this space must be clear about the type of customer they are likely to be seeing and the service they can offer which makes it work for both them and the retiree.
It needs a tailored approach which is adaptable and flexible and sits comfortably within this new structure – if they can get this right then I see no reason why advisers can’t be the next natural step for those leaving Pensions Wise.
Stuart Wilson is managing partner at Later Life Academy