In this roundtable Helen Morrissey asks a panel of industry experts about the support advisers need when advising on the Budget
Chris Daems, director, Principal Financial Solutions
Keith Churchouse, director, Chapters Financial
Damian Coleman, head of sales, Scottish Widows
Chair: Helen Morrissey, editor, Retirement Planner
Helen Morrissey: We have seen rapid retirement policy developments in recent months. How is the advisory community dealing with this?
Chris Daems: The advisory community is quite robust. Change happens to our profession all the time, so we have coped pretty well. With the challenge that change brings comes opportunity, and I know that we have had clients who have seen changes occur and need more help.
Keith Churchouse: This change is coming post-Retail Distribution Review (RDR) and if you think about the fact that most good financial planners have been through a huge transition process over the past two years, then actually this change isn't that great in comparison.
Damian Coleman: The changes in the Budget, while bringing some challenges from a provider's perspective, is giving financial planning a new lease of life from an adviser's perspective. The feedback we are getting is that it is a great thing and we need to find ways to work with advisers to tap into that potential.
Morrissey: What are the key questions clients have been asking you about the Budget?
Daems: The calls we are receiving have been about how to access the freedoms. But I think what has been downplayed, especially politically, is some of the disadvantages of doing that, especially the tax. We have been doing a lot of clarification along the lines of "maybe you don't want to take all your cash out and buy a Lamborghini".
Churchouse: There has certainly got to be some more education of the public. There are some nicely naive questions coming through, for instance, about taking the entire pot as cash. Well, it is not as simple as that.
If you think about it, George Osborne is effectively swapping debt – gilts, for cash – tax take. The reality of the situation is that I don't think people have really got into that yet. We are all working a lot longer, so there are many people who maybe reach the age of 55 or 60 and think they'll draw their pension benefits – and are still working.
That money will just be tacked onto their other income, so they could be paying 40%, if not 50%, on it – once they know that the recoil is quite palpable.
Coleman: Judging by the volume of telephone traffic that Scottish Widows and others have received, there is a massive need for advice. The changes are a great thing for everyone in the industry, but we need to link those ringing up looking for advice with those who know what they are talking about in terms of giving proper advice.
Daems: If you have spent years saving for a pension, the odds are it is unlikely you are going to go out and buy that Lamborghini. I think the myth of people just going out and spending it is just that – a myth.
However, the key factor is people are starting that conversation and we are sitting down with clients, having a measured, considered conversation about ensuring their pot of money lasts them the rest of their life.
Morrissey: Come April, I think you are going to see a surge in demand. A lot of people decided to put off retiring this year once the Budget announcements had been made, so what are you expecting from April?
Churchouse: OK, I'll add in just one caveat in that there is still time for those to be retracted and we have seen that happen before. If you remember, Pensions A-Day fizzled out in the last furlong.
But I do think we will see a lot more interest from those that do want to access their pensions, and I think then that advisers have a key role to ensure that people do not go out and buy the sports car and wrap it around a tree.
Coleman: The issue through the lens of a provider is there is going to be a lot of people who are 55 and over next April and who probably would not have accessed any form of money, but with the changes that are coming now they might.
Also, we have people who have delayed doing anything, who are 55, after the Budget. It is impossible to put a number on this.
Churchouse: There will be a huge surge in enquiries. But actually, the fallout from that – the actual delivery of people drawing their pension benefits – will be far more muted than the surge of enquiries that we get.
There might be people who realise they have not saved enough for retirement so decide to put more into their pension.
Morrissey: How can we work together to ensure, as far as possible, good customer outcomes in your view?
Coleman: What is incumbent on providers – Scottish Widows being one of them – is to make sure that the options actually work. So point number one is now that the Chancellor has introduced this change, how is it going to manifest? How are we going to explain to people how they can get tax-free cash, for instance?
What we are trying to do at Scottish Widows is work very closely with the advisory community to at least guide people to the options available to them, one of which is directing them to advice.
Daems: The key gap is an education one. It is about informing people what their options are, but potentially not basing that too much around products. It is about empowerment. The adviser community has been trying to do that for years to certain success. If we can get that education puzzle closer to right – we are never going to get it perfect – then people will be more informed and make better decisions.
Churchouse: It is also important that providers communicate strongly to financial advisers about what they are doing and the systems they are planning to put in place to allow this flexibility to be achieved.
There are the rules, then there is our interpretation of the rules, and then there is providers' interpretation of the rules. They are all pretty similar, but they may not actually be the same. We see glitches with many companies where the regulation will allow X, but actually it doesn't suit the insurance company so they don't do Y.
It would be good to understand the foibles of what a provider can and cannot offer so we can select a provider promptly who can actually meet the client requirements.
Morrissey: You have all been talking about educating the public, but obviously advisers have had to get grips with a lot of changes as well. What do you see as the main gaps in adviser knowledge ahead of these Budget changes?
Daems: On the whole, advisers are pretty top notch at education. I've had to continually adapt and change and make sure my knowledge is completely up-to-date. What we need to do as a community – and I'm including providers in this – is just get that education piece right. So not only do we understand the knowledge, but also how are we explaining it to the people who matter.
Churchouse: It would be nice to see us singing from the same hymn sheet. It would be good to see the providers tied into that as well. That may be something that is missing at the moment.
Maybe the likes of the Chartered Insurance Institute (CII), the Personal Finance Society (PFS) and the Institute of Financial Planning need to get together and start to say "we need a stronger voice". To actually say: "Look, guidance is great but what you want is advice," and maybe that's the point we are not making that clear at the moment.
Coleman: We'll have clients who come to us through yourselves, we'll have clients who come to us direct, and we'll have clients who come to us direct but actually should be coming to us through yourselves.
We have got to make sure that what we are building makes sense, first of all, but makes sense depending on whatever route you come to us through.
That might be the telephone; it might be online; it might be through an adviser. But the whole guidance piece is absolutely impartial and independent and we fully support that.
Daems: I agree with Keith in terms of having clarity of process, so if you are in a position where you are working with the advisory community, what would you accept and what won't you accept, in plain language – that would be really useful for me.
Morrissey: There has been plenty of talk in recent weeks about providers looking to bring new types of products to market ahead of April. What do you see as the education issues there, for advisers as well as the clients?
Churchouse: I'd like providers to say now what route they are heading down to allow us to get to grips with the direction providers are taking. Scottish Widows will have a different view to LV=, to Standard Life, and so on.
We need to understand if there are foibles and if so, are they difficult? If they are, are they in the best interests of our client? It would be great to get an idea of what the future will look like from various providers.
Daems: The danger of just adding loads of new products to the market is that it complicates things. What we need to do is have these new products that provide flexibility, but make sure that the simplicity is provided around them so they are easy to use.
Churchouse: It is also down to financial planners to innovate. We have been working on an online advice site for years. We are about to relaunch that in December under the name of saidso.co.uk. It is down to the adviser market to innovate and lay out our stall a little more clearly than I think we are doing right now.
Coleman: There will be innovation, but that's a good point from Keith – I think we will see a bit more of that at the advisory level.
Daems: Interestingly, we look at auto-enrolment as a huge opportunity. A few years ago, we were getting a bit scared about auto-enrolment because there were a lot of small- to mid-sized enterprises and micro employers that we did not know what to do with. We had to build an online platform to manage them.
Before the RDR, there was a lot of reliance on providers to provide this innovation. But there are people in the market now doing it themselves.
Morrissey: Auto-enrolment is going to be a big issue and it is great for those people who are used to accessing financial advice. However, we all know there is a massive percentage of people that, for one reason or another, are not accessing financial advice. What support is available to members of schemes where an adviser has advised an employer on auto-enrolment, but they might not have had any involvement with scheme members?
Coleman: This is a big issue for Scottish Widows. So the classic employee benefits model is where the employer is advised, but the members are not. I'd be interested in what Chris and Keith think. How do we deal with that?
Churchouse: Pre-RDR, there was much talk that the adviser market was going to be decimated. We have not seen that, and actually the Financial Conduct Authority would indicate adviser numbers are rising. We could easily see a huge resurgence to higher levels than we have ever seen before of the financial planning market.
I would like to see providers being clearer on the support they will offer intermediaries in guiding those clients who are non-advised to actually tell them they have the guidance option, but also to see them being far stronger about the advised option than they have been.
I still think that some of the insurance companies see advisers as the typical face-to-face, tea, coffee, nice chats, two hours-burnt-on-doing-a-straightforward case people. The reality is there is plenty of innovation.
What the greatest concern is, I think, for the insurance industry is the fact that if that does continue to grow, we might actually move past you.
And if that is the case, the insurance industry might find they have missed a trick because they were supporting their profit margin. I understand that, but actually maybe it is time to support the intermediary market.
Morrissey: What kind of support do advisers need to make sure this innovation continues to develop?
Churchouse: This comes back to a bit of a collective. It would be good to see someone like the PFS and the CII, et al coming together and saying to those that want to innovate to let them know and they will bring you together as a collective and share ideas.
Daems: The key thing about innovation is – and we found building our auto-enrolment platform – is innovation is tough if certain people you need to innovate with do not want to play the game.
We have spoken to a lot of the traditional insurers who could not accommodate being on our platform because they were not prepared to do certain things we needed the platform to do.
So innovation needs collaboration. It needs all interested parties getting involved. But it also needs you to have a shared vision to aspire to.
Coleman: Scottish Widows have auto-enrolled something like 300,000 people into pension schemes just this year, so we are at the vanguard. We have had challenges in dealing with that, so we totally get your point about the innovation.
One way in which we are supporting the advisory community is through seminars and the roadshows. We also do these staged, strategic, orientated thought leadership dinners where we invite industry figures such as yourselves to come and tell us what we should be doing. That has informed the development of some of the retirement funds. I would be interested in hearing what else we should be doing.
Churchouse: How can they support us? 'I don't know" is the answer to the question and the reason why I say that is because it is possibly down to us to discover us again. It is down to the industry to discover what we can do and I'm not sure that has been done yet.
If you take (I'm going to go off slightly), if you take the aggregators – you know, the GoCompares and all of the rest of it – if you think about the fact that they have completely changed their market over the past ten years, and now seven out of ten people will go to an aggregator site to buy their plans – the reality is that it is going to happen with our industry.
We'll see more people working in our industry, but they might actually be doing less face-to-face work and I think that transition has got to come.
Daems: The innovation actually is in the advice market and I agree with you, Keith. I'm not sure where providers fit in with that. but actually I think the thing that providers can do today is understand that the advice market is changing and work together with the potential innovators to on how they can accommodate these changes.
Coleman: You are talking about being open-minded on product development, open-minded to different distribution models, different routes to market, being more flexible and fast-moving.
Daems: I think just having that conversation.... I don't know if culturally the life assurance industry is comfortable with that, but the world's moving too fast not to be.
This is an edited version of a video roundtable. Click here to listen to the whole discussion
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