When judging the Money Marketing awards, during every interview I always ask financial services advisers and product providers “how client centric is your proposition?” For me this is the most important facet of treating customers fairly.
A discussion paper issued this month by TPR discussing value for money in DC pensions whilst accumulating does not appear to put the customer first. The TPR wants consistent assessments on value for money, focusing on metrics to enable meaningful comparisons between schemes. This was an unusual paper to read. I’m such a nerd I read many FCA papers a year and the tonal feel of the TPR’s discussion paper makes me think it is written for DB scheme trustees in the 1990s.
In the discussion paper there is little mention of the value of financial advice provided to the pension policy holder. As readers know, financial advice nearly always results in better client outcomes than DIY investing. Each pension client is different with varying risk appetite, aspirations and knowledge. Some like regular two hour meetings with a financial adviser so they can understand all options, others regard seeing a financial adviser as painful as visiting their dentist. Some clients collect stacks of financial services documents in a carrier bag, while others prefer paperless apps with instant valuations.
Vary rarely is retirement financial planning the same for one person to another.
The issue of charges on DC pensions has been under the spotlight for years and the expensive legacy funds are slowly being brought under reasonable charges. The DWP Survey of 2020 found that for qualifying DC pensions the average charge is 0.48% pa is significantly below the 0.75% cap. It’s madness to relax the 0.75% cap on smaller schemes DC default funds from October to allow the fund managers freedom to invest in illiquid funds. The charge cap provides a surety that charges are not eroding gains and that illiquid asset investment – aka Woodfood – are not invested in, as these can be extremely high risk.
I truly believe that investment performance is the most important issue in investing for the long term. Nest pension scheme funds failed to hit annual performance benchmarks during 2019/20 so the Nest charges are not as important as poor investment returns. Negative returns due to poor performance is the biggest client concern.
Financial services customer service for the majority is now based on the functionality of an app where chat bots instantly provide guidance, and new pension policies are available within hours.
This TPR discussion paper does not cover the benefits of the cost versus the added value of the provision of client specific financial advice, or the advances in technology that both offer better pension in accumulation outcomes, communication and client satisfaction.
Kim North is managing director at Technology & Technical
So lets get this right, Auto Enrollment is about Default Funds allocated by your employer, with no accountabilty, possabley in the same fund for 49 years!!!! No one has the RESONSIBILTY of review the Product Provider or fund,,,,, Now the question, Please name mea provider or fund that could be considered Fit for Purpose,,,,,, as I have said manya time, Auto Enrollmenbts is a NATIONAL SCAM. the next PPI, Retiremnet funding so so much about review’s as oftern as possable.