Monetising the mammoth job of helping firms reach auto-enrolment staging is preventing advisers engaging with employers. But help is at hand...
It is an opportunity, apparently, and don’t advisers know it. Ever since the concept of auto-enrolment (AE) was first proposed by the Pensions Commission in 2006, advisers have been excitedly informed that employers might need their help.
A Google search for ‘auto-enrolment’, ‘opportunity’ and ‘advisers’ brings up 148,000 results. Advisers would be mad not to contact all nearby employers to offer their services, the Gods seemed to say.
Yet, even for advisers well versed in the ways of corporate pensions advice, helping an employer set up an AE scheme – on schedule, on budget and within the guidelines – is a mammoth project. It is not the advice itself, advisers say, but the divvying up of tasks and responsibilities, and the small matter of getting paid. As Syndaxi Financial Planning director Robert Reid says: “Monetising AE is a big problem for some advisers.”
How to charge for auto-enrolment advice
Undercharging has been the most frequent offence on work carried out for early ‘stagers’ (every business has a ‘staging date’ based on the size of their PAYE scheme), according to Scottish Widows pensions expert Robert Cochran, and Reid agrees: “Advisers often charge less than they should because they assume it will lead to further work, but this is a high risk strategy because there are no guarantees.”
Even for those with decades of experience in corporate pensions, AE has proven to be a different animal.
“We have been working in corporate pensions for almost 30 years but establishing a suitable cost for implementing AE with existing clients can be difficult,” says Corporate Benefits Consulting director Allan Maxwell, pointing out that new clients pose a simpler challenge.
“It raises difficult questions, such as whether there should be cost parity with the existing scheme or whether potential economies of scale with AE should be taken into account. More people are likely to be involved in the AE scheme, making it potentially cheaper per head, but this may raise questions about the pricing of the first scheme. Similarly, would the new scheme supplant the old one? These are conversations that need to be had.”
Scottish Widows’ Cochran says there are digestible charging options open to advisers carrying out AE work, despite the enormity of the job and the additional pressures applied by the Department for Work and Pensions and the Office of Fair Trading on the commission model.
Set cost per scheme v employer specific charging
On the face of it, a set cost per scheme seems a nice, clean solution and is what many advisers would aspire to, according to Cochran. But he says this model is “beset with challenges”.
For example, two 50-man firms can present completely contrasting challenges: one may possess multiple payrolls with different frequencies, poor employer engagement and poor data, while the other may operate a single payroll with a fixed monthly pay date and precise, accessible data. It is important, Cochran says, to have flexibility in your charging model to cope with employers’ various capabilities.
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