Who will advise the new advice seekers?

I firmly believe this new regime of choice and freedom in pensions will only ‘work’ for customers if we have two things. The first is better tax rules allowing innovation in retirement products such as annuities. (And that’s been promised by the Treasury – draft legislation is due out soon.) And the second is impartial guidance to help people understand their options on retirement.

This is the challenge that now faces TPAS and MAS and others. Design an effective guidance guarantee so that people understand their options and what they can do to provide themselves with an income for the rest of their life.

The accepted wisdom doing the rounds at the moment is that the guidance will explain people’s options to them. And it will hopefully spur a number (as yet unspecified) to seek professional advice to figure out which of these options is best.

I have no doubt that this supposition is right. Some people will seek advice. But what I am curious about is who will advise these new advice seekers?

The FCA has mooted the idea that as advisers will benefit from this new source of customers they should pay some of the guidance costs. But one adviser’s reaction on seeing the potential FCA advisers’ bill for 30% was (and I paraphrase) “why do I have to pay? I don’t want these clients anyway!”. And I think that probably rings true for a number of professional advisers. Sure, there will be some ‘value’ cases that professional advisers will be happy to add to their books. But some of these potential customers will have assets that fall below some advisers’ target markets. And although these new customers may be willing to pay – and see the value in paying - for advice they may not be able to afford quite that much.

So, what will happen to them?

This is a genuine question – I would like to know your thoughts.

Am I wrong? Will all these new advice seekers get swallowed up by the professional adviser market? Is there enough capacity and appetite out there?

Will professional advisers develop some sort of new proposition to be able to ‘service’ them in more cost-effective ways? And can they do that under the current FCA rules?

Is there a role for simplified advice as it stands? Or does it not make economical sense? (If you are employing a professional adviser, then is it just more sensible to let them offer a full advise service? After all, that’s what they are trained to do.)

Or do we need a new solution? I would hate it if we created a new breed of customer who actively sought professional advice but was unable to access it. Even if it was just a handful of people.

Answers on a postcard please ....