In the final part of our roundtable on key pension and retirement issues, RP asks what the industry can do to better engage consumers in pension and retirement issues. You can also read part one here and read part two here.
Lawrence Gosling (LG): Do employers and product providers have a role in helping to bridge the mass market advice gap?
Margaret Snowdon OBE (MS): Employers do have a big role to play, but the current theme is all about personal responsibility – we’ve got to educate individuals to help themselves and that’s quite difficult to do.
If you ask someone “tell me your risk profile”, their eyes will just glaze over. We need to start thinking about language that people actually understand.
Also, I don’t think we do the nation any service when we continue with the illusion that retirement will be OK. My benchmark for retirement is looking at what my parents have and they are not rich, but they are reasonably well off. I just assume I’m going to be the same, why would I be different? I think everybody does that.
Samantha Seaton (SS): Retirement is not going to be a seamless transition. Over the next 10 years, we will see a change in the way we work and how we go about it. Digital inclusion is likely to change the landscape.
And as people phase into retirement, we all need to think how best to prepare people for what retirement might mean for them both practically and financially.
Karen Barrett (KB): One way we can start to help people think about retirement is getting them to understand that there are different ways in which they can build up their savings – whether it’s an auto-enrolment pension over here, their ISA savings there, or maybe just a cash savings account somewhere else.
There is much more of a pick-and-mix attitude to how people take on financial products and how they seek advice for some of those decisions.
Lucian Camp (LC): A key problem is that the industry has succumbed to some sort of collective delusion that it is possible to emerge from the golden era of defined benefit pension schemes to an era in which people will provide for themselves to a reasonable level of satisfaction.
I don’t think there is any reason to believe that this is within the scope of individual’s ability, nor have we built any kind of infrastructure to help them do this.
LG: What about the specific role of product providers?
Peter Mann (PM): For product providers, the priority at the moment has been around regulation. Innovation largely comes last because of other imperatives. Product providers don’t engage with consumers in a way that any rational organisation designing clothes or building houses would do.
They build products and services where the primary client is the shareholder and the secondary consideration is the client.
Matt Connell (MC): The balance between shareholders and customers is difficult because in order to get the right solution for the customer, you have to invest pretty heavily in IT. A financial services provider can’t just produce products like, for example, a producer of goods would and just scrap it.
With IT development a lot more fluid now, I think there is a light at the end of the tunnel in terms of producing solutions that are more free to flow and lighter on investment.
LG: How much of a silver bullet is auto-enrolment?
MS: Auto-enrolment has brought a lot of ordinary people into the saving arena, but it has actually resulted in a decrease in the amount that people are saving. I worry that people are putting 1% of their salary into a pension and thinking job done, my retirement is sorted. Until we start being realistic about what a bad pension saving outcome might look like, people will be complacent.
MC: Thought also needs to be given to the changing nature of employment. The traditional infrastructure has disappeared for a lot of people, so there is the question of what replaces it.
Andy Davies (AD): There is a real need for central government, or whoever it happens to be, to educate people as to the dangers of not saving.
LG: Can advisers fill the gap?
KB: Absolutely – they are very resilient as a group and they are always looking for new opportunities. We know that people are not seeking advice for their biggest life decisions, some of which are irreversible, and there’s a massive positive social impact we can manage at the point where they have some wealth accumulated.
I don’t think it is necessarily about those who are less digitally and financially included or not. There are opportunities across the whole bandwidth of people who are moving through life and have those decisions to take.
AD: Unfortunately, I don’t think advisers are very good at describing the value that they add in a way that makes customers see how they could be helped.
For example, in the financial wellness survey we did, there were two people who scored themselves in a way that would have made them financially well – yet a very different place from where they transpired to be in reality.
One of them was a single mother who scored herself as financially well, and then when we probed, one of the biggest financial challenges of the last financial year was being moved from weekly to monthly pay.
She is the sort of person who would really benefit from financial advice, but for some reason she did not see that she needed it – and perhaps did not see that a financial adviser could help her.
LG: How can advisers explain these key messages and the value they add to consumers?
LC: I struggle with whether face-to-face advice is sensibly affordable for the majority of people. If we think of it in terms of getting advice from an interior designer before you decorate, but you know before you spend several hundred quid on paint you also have to pay £5,000 of advice from an interior designer. It’s just not going to happen. I worry about the affordability of advice for the mass market consumer.
PM: Financial services manufacturers have a large role to play in bringing products and services to their customers. It is not really an adviser’s fault if they have a suite of bad turquoise paint to sell; it’s actually the fault of the manufacturer. Their understanding of the client should go through all parts of the value check, not just the few who can afford it.
MS: We need to get over this fear about advice and who gives advice. We need to stop calling it advice and guidance, and actually call it help. If we talked about help, we could move away from this horrible, almost regulated spiral where everyone’s afraid.
We have lost a whole generation of people who thought about saving and thought about how important it was for later life to people who are just thinking about the moment.
SS: Past generations knew the value of putting something aside. Surely it is not that difficult to find a way for people to understand that for every pound you get, you put 10p into a rainy day fund or a current account.
It does not really matter where it is. It doesn’t seem hard, yet we make quite a mountain of it.
The post Pension planning: How can we close the advice gap? appeared first on Retirement Planner.