Who benefits from annuities becoming a commodity?

I was involved in a twitter exchange last night where it was suggested an annuity is a commodity and customers should be aware of the risks if they enter into a broking site. 

I think it’s a huge risk to consider the income for the rest of your life as a commodity, but I can see how it happens.  Also I can see that the annuity providers will benefit from this thinking.  It’s becoming as easy to broker an annuity as it is to simply taking the annuity from existing provider.  That is good an bad.  Good because mostly going to an annuity broking site will deliver a better outcome than just taking annuity from existing provider.  Bad because it creates the illusion that its going to give you the best outcome.

Customers are simply not sufficiently aware of the choices at retirement.  They are not aware enough of the cost of the broking solutions, and they are not aware enough of the options they need to take even within an annuity, let alone outside of it.

There is a fair amount of talk about making shopping around for an annuity compulsory.  Whilst a step in the right direction it doesnt go far enough.  How about a couple of additional steps in the process at Retirement.

Check it’s the right product 
Why don’t we insert, for EVERY person at retirement, a set of questions around their situation.  They don’t have to be lengthly or too tricky.  There are quizes for this sort of thing already on some websites.

      1. How much security do you need?
      2. Do you need money now or later, inflation important?
      3. Do you need the income, or are you more worried about people you leave behind?
      4. How comfortable with risk are you?
      5. How is your health?

Little bit of underwriting
Then for each person ask them some questions about health.  This is to get them to think about health, and fact that by declaring the more common ones, they can get more.

If we made that mandatory then you get a report showing which option might be more suitable, and also the difference declaring health or lifestyle issues will make.  I think it might make some customers think about things more.

And we shouldn’t stop there..

Developing the online broking market
Firstly, I think these have helped raise the profile of a problem that existed already.  Customers are getting better outcomes by going here than simply going with existing provider.  But is it enough, when we all know they could get better outcomes.

We seem to be going for miniscule levels of disclosure at all levels of the accumulation stage.  I know the commission taken from broking sites is disclosed, but is it clear?   If you had the commission figure right beside the income you get I think that might make it clearer.

Also, need to be able to show how much of the market your broking solution is covering.  So again something right beside the income saying, we have contacted 20 of the 60 annuity providers in the market to secure this rate.

Finally, the same questions I raised earlier around product selection must be taken before you can buy an annuity online.

I suspect for those customers that want ease and access and trust the brand delivering the service they will continue online.  For those really unsure, or unaware, they might seek more advice and realise they can afford it, as they had been paying something anyway.

I think these steps might reduce the continued risk of the income you receive in retirement being viewed as a commodity by those who create the product and broking sites.

The real problem is who pays, and aside from the customer who benefits?   

 

 

 

 

 

 

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34 thoughts on “Who benefits from annuities becoming a commodity?

  • This is spot on Dave. There are too many people retiring who don’t know what they don’t know. And yet it seems a percentage of them just aren’t interested in doing anything to change that situation. Online services fill a gap as you say but there is still a perception that it’s cheaper to cut out the middleman and go direct – even though this is one of those instances where it is very much better value in every way to take specialist advice.

    Reply
    • For sure lot of people blindly walking into products unaware they could have a better retirement.

      Reply
  • Good stuff Dave.

    As I see it there are two issues:

    1. The playing field between non advised brokers and IFAs isn’t level and needs to be changed

    2. Retirees need better education / information to understand that an Annuity isn’t the only option

    To take each on turn:

    We get 30 – 40 Annuity enquiries each week, not huge compared to the ‘big boys’, but enough to keep us busy. We are nearly always in competition with a ‘non-advised’ broker and during this year have seen some pretty shocking examples of poor practice. I’d therefore like to see the following changes with immediate effect:

    1. Ban commission on non-advised Annuity sales, it’s too large as it is and allows some non-advised brokers to create the illusion that they don’t charge a fee and that their service is free. RDR was supposed to ban commissions, let’s extend that principle to the non-advised Annuity market

    2. Force all non-advised brokers to carry out basic checks on the ceding scheme to ensure no valuable guarantees are being lost. We’ve seen one example where a retiree using a non-advised broker (one of the ‘big boys’) nearly missed out on a 10% guaranteed Annuity rate. Some of the better ‘non-advised’ brokers already do this, they all should be forced to

    3. Ban commission kick-backs from non-advised brokers to clients, why is this suddenly now allowed?

    4. Introduce a required qualification level for employees of ‘non-advised’ brokers and monitor standards more closely. We’ve seen at least one retiree told that his spouse’s health wasn’t relevant; he was buying a joint life Annuity and she’d had a brain tumour!

    5. Force ‘non-advised’ brokers to make it clear which Annuity providers they can use and which ones they can’t. Independent isn’t “most” of the market, or “80%” of the market

    These changes should help to level the playing field between advised and ‘non advised’ brokers and help the public better understand the service they are receiving.

    But, that doesn’t address point 2, which is crucial to achieving better outcomes for retirees, both Dave and Kath rightly point out; not enough people are looking at other options. The first question is all too often “how can I get the best Annuity rate” (assuming the retiree actually does shop around), it should “be is an Annuity right for me in the first place?”

    Kath sums it up perfectly when she says “People don’t know what they don’t know.”

    We need to make financial advice easier to access at retirement, a simplified advice process would help, as would online innovation, links to employers and a campaign to make IFAs seem more accessible to the public and not just for the ‘elite’. After all, for any reasonably sized fund (our average enquiry is £86,000) the fee to an IFA is probably lower than the commission paid to a ‘non-advised’ broker or by going direct.
    We also need to get the message across that an Annuity is far from a risk free solution.

    Education, information and access to advice, all need to be improved.

    Phil

    Reply
    • Great reply phil. I wonder how much support or traction a ban on commission in this space can get?

      Reply
  • The Specialist At Retirement Adviser group discussed adopting a voluntary code amongst providers of expert help at retirement – this includes both advised and non-advised services.

    The key components of the Code were as follows.

    Responsibility clear
    Be up front about whether the advice means the client takes ultimate responsibility for decision or whether the adviser does.

    Accessible
    Everyone helped no matter how small their pot

    Client’s interest first
    Independent, whole of market review with ceding scheme checked.

    Value for money guarantee
    Consumer never charged unless they are made better off. An explicit fee is agreed whether taken by commission/adviser charge from pension pot or met by client by invoice.

    Clarity
    All advice to the client is in writing, written in Plain English avoiding jargon and clear as to the recommendation or information provided..

    Best outcome achieved
    Consumer must be offered responsible advice where it is reasonable to believe that member may be making a poor choice. Responsible advice has to be demonstrably be the best outcome.

    The Society of Later Life is willing to be the independent guardian of this Code and plans to issue the Code for public consultation later this year.

    SARA asked PICA to work with us on this and to feature those firms who adopt the Code in their directory of advisers. PICA refused to engage on this and were opposed to having any minimum standard other than a FCA license to sell products.

    We have had support for the idea from the FCA Consumer Panel and NAPF. It has been a hard slog to get Government civl servants interested but we may be making some progress here.

    We need to unite with one voice to support policies that will promote expert help to consumers at retirement that aims to deliver best practice solutions.

    Reply
    • Thanks Alan. Was unaware of this. For sure I think the proposals would go a long way in helping. The profile of this work needs raised and I think we need advisers and product providers getting behind it.

      Reply
  • Great article Dave,

    I think Education is the key and really it has to come from the bottom, i.e adding it into auto-enrolement but this will be a long slog.

    I agree with Phil in that many people think that financial advice is too expensive and they can do it themselves cheaper, this is why they go online in the first place. Then when they speak to the unqualified non-advised sales person who tells them their services are free and they will get them the best rate then they are happy. The client has now got the best annuity rate, perfect everyone is happy. The worrying thing here is that the online brokers genuinely think they are offering the best thing for the client. At no point has a phased retirement, drawdown or fixed term annuity been mentioned.

    The client is happy as they have bypassed the adviser and got a better rate. Little did they know they would have paid the same if not less for advice and may not have ended up with a product that was fixed for the rest of their lives and potentially unsuitable.

    Non-advised companies will suggest advisers will not offer advice to annuity clients as its not worth it financially but this is simply not the case.

    I think one big problem here is that many advisers dont have resources to compete with marketing companies who spend hundreds of thousands every month on getting annuity enquiries in for their salesforce. They are spending time advising not marketing.

    Reply
  • In direct response to your question, ABI members are the ones who benefit! That’s why they are so keen to imply that an annuity is the only solution.
    My own experience is that most people dont understand that there is a choice of doing nothing at all when they get the letter from the pension company, and they go off and take a tax free lump sum or buy an annuity.
    Successive governments have created the complex at retirement rules for pensions. They have also created the bizarre situation where an annuity is the default choice if you want an income from your pension, but nobody who has money outside of a pension gives an annuity a second thought!

    Reply
    • I think you may well be right. Also the broking firms have a lot to gain too. Only just need to see recent stuff on claims the service is free as well.

      It needs cleaned up and needs really simple explanations of choices. Code mentioned by Alan below feels like a good place to start.

      Reply
    • Spot on Philip, especially the comment about deferment. It’s a very valid but often overlooked option, which clearly a non advised broker can’t recommend and would have no incentive to.

      Reply
  • When does an annuity not become an annuity? Is it a clients attitude to risk, their retirement goals or how much money they have in their fund? I don’t see many advisers recommending fixed term annuities or drawdown on 20k funds.

    In an ideal world everyone, regardless of how much their fund is worth would get impartial independent advice. The reality is that they are not, so how does that change. Is there the appetite in the advice community to give advice to everyone? If the average enquiry was worth 86k then I imagine it would be, but it isn’t and the real average is around a quarter of that. If you were to ask most brokers they would probably tell you their average case size is somewhere between 30-40k. In fact I saw a case today which generated the princely sum of £46 commission (in case you are wondering eligibility for triviality was checked and didn’t apply).

    My personal opinion that a banning of commission might not level the playing field, in fact it could have the opposite effect. The main reasons being that most brokers, having lower operating costs, would simply charge lower fees than most advisers, thus making it even less economical to give advice on “small pots”. The second is a matter of distribution reach. If you can give a better rate or “factory gate price” to a distributor who can sell 500 of your policies , as opposed to someone who sells 50 then you will. The providers make big money on annuities and commercial deals would be struck.

    I agree with all points raised above, better standards and practices are needed in some firms. What I am genuinely interested in seeing is if the mantra is “advice is best” then how is this delivered to everyone and how will it work. Some firms, including mine, are delivering at retirement advice in an affordable way (as well as non-advised); many others are too. Perhaps the answer lies in the broker market (god forbid)….

    Reply
    • Adam. Some good points. There is of course the point that lots of people have small pots. and annuity probably is the only option. But establishing this before going to broking should happen. So how many people have a small pot but other bigger db pots. Or a number of small pots adding up to a bigger pot (these stats are hard to come by, but I’ve seen some research that suggests average customer has around 3 pension pots ).

      I really think broking sites will have a place but it needs to be clearer. A quick trawl on sites either say outright or suggest the service is free. That is more than a little misleading.

      On the whole broking sites are delivering better outcomes to customers then if they just say with provider. On te he whole that should be welcomed.

      Just feels to me we should be striving for more. Maybe for pots under 30k there should be a govt backed broking site that is genuine whole of market. And free?? Other than needs to comply with codes Alan suggests.

      Reply
      • Thanks Dave. There is lots of challenges, for instance your comments around establishing whether or not annuity is right. How would that be delivered? It would probably have to be free, and if that was the case then probably something like a decision tree would be put forward…..that worked for stakeholder pensions…..!

        I agree there is some misleading messages out there and these are being picked up on more and more, which is good to see as there is definitely good and bad in broking, as with most industries.

        As I said some innovation would be good as well as some focus on the retirement income space as a whole, not just finger pointing at the broker market (not an accusation at you or anyone else, I think you put forward a very balanced view)

        Cheers

        Reply
    • Hi Adam

      A few points in response to your blog, probably not a surprise to hear I disagree with some of your points, but there’s no harm in healthy debate, which should make for better outcomes.

      You’re right, not many advisers will recommend Fixed Term Annuities and Income Drawdown for £20,000 pots, generally because, unless there are other significant sources of income in the background, e.g. DB schemes, these solutions are not appropriate for such small pots. But that doesn’t diminish the value of advice. After all, not many advisers will recommend a VCT or other similarly adventurous investment to a first time investor, who has a relatively small capital sum; but this doesn’t reduce the first time investor’s (or indeed first time retiree) need for advice.

      I believe there is capacity and willingness in the advice community to give advice to all comers, we certainly do. I’ve said before that going to a non-advised broker is a better option than going direct, or indeed buying an Annuity from the ceding scheme. However, I passionately believe taking advice is better than both options.

      The answer to reducing advice costs for smaller pots lies in better use of technology and online systems to reduce the time it takes to deliver advice. I’d also like to see a simplified advice process put in place, which would then reduce compliance overheads.

      I’m still far from convinced that banning commission would have a negative effect on the market. It wouldn’t stop Annuity providers from giving better rates to bigger brokers, it would allow consumers to compare options on a like for like basis and it would hopefully mean an end to non-advised brokers taking commission of up to 3.5%. It would also put a stop to some non-advised brokers from claiming their service is free, or that the consumer doesn’t pay for the service.

      If banning commission in the advised market was seen as a positive step I fail to see why it should be allowed in the non-advised space.

      Phil

      Reply
      • Hi Phil,

        Good to hear from you, good points as usual.

        I agree fully with your comments around the delivering of advice through technology, this is something which we do very successfully. We are not just a non-advised broker, we also deliver affordable, accessible and quality advice to our clients.

        The point I am trying to get across isn’t one of anti advice. I have spent my entire working life building relationships with advisers and intermediaries, and as a firm we also believe in advice otherwise we wouldn’t be delivering it.

        What I am genuinely interested in hearing about is how advice is delivered to the mass market; a point which is in danger of being overlooked in the current tabloid frenzy. I do welcome press coverage on annuities, as we all know the lack of awareness on issues such as the OMO is pretty huge. What I find pretty hard to swallow is that when some of the “contributors” to these tabloid press articles, talking about the perils of non-advised, actually offer a non-advised service themselves….the irony!

        Finally re the 3.5% commission. This 3.5% commission becomes a 3.5% fee (same £ outcome) but with the risk of broker getting a better rate for the same fee as the IFA (some IFA models are built on 3-3.5% initial fee). A client would argue that’s comparing like for like but they get a better rate with the broker. I like many in the industry know it’s not just the rate, its also the shape that’s important. The trouble is our clients don’t work in the industry, so perhaps its a matter of education?

        Adam

        Reply
        • Hi Adam, sure phil will respond. But for me there can be some initial screening that could establish if a customer would benefit from advice. And whether or not annuity is best option. My original post covers the types of questions. I don’t think that is too hardy to deliver.

          If we then make the commission taken transparent(if banning doesn’t happen) customers can make a clear decision about the need for advice v the cost. I also agree broker solutions are better than no advice, but is it the best outcome? We should be striving for this.

          I think it’s this kind of debate that can help shape better outcomes.

          Reply
          • Dave,

            Agreed, you are seeking solutions to the issue, which I support wholeheartedly.

            Adam

  • In direct response to your question, ABI members are the ones who benefit! That’s why they are so keen to imply that an annuity is the only solution.
    My own experience is that most people dont understand that there is a choice of doing nothing at all when they get the letter from the pension company, and they go off and take a tax free lump sum or buy an annuity.
    Successive governments have created the complex at retirement rules for pensions. They have also created the bizarre situation where an annuity is the default choice if you want an income from your pension, but nobody who has money outside of a pension gives an annuity a second thought!

    Reply
    • Spot on Philip, especially the comment about deferment. It’s a very valid but often overlooked option, which clearly a non advised broker can’t recommend and would have no incentive to.

      Reply
    • I think you may well be right. Also the broking firms have a lot to gain too. Only just need to see recent stuff on claims the service is free as well.

      It needs cleaned up and needs really simple explanations of choices. Code mentioned by Alan below feels like a good place to start.

      Reply
  • Great article Dave,

    I think Education is the key and really it has to come from the bottom, i.e adding it into auto-enrolement but this will be a long slog.

    I agree with Phil in that many people think that financial advice is too expensive and they can do it themselves cheaper, this is why they go online in the first place. Then when they speak to the unqualified non-advised sales person who tells them their services are free and they will get them the best rate then they are happy. The client has now got the best annuity rate, perfect everyone is happy. The worrying thing here is that the online brokers genuinely think they are offering the best thing for the client. At no point has a phased retirement, drawdown or fixed term annuity been mentioned.

    The client is happy as they have bypassed the adviser and got a better rate. Little did they know they would have paid the same if not less for advice and may not have ended up with a product that was fixed for the rest of their lives and potentially unsuitable.

    Non-advised companies will suggest advisers will not offer advice to annuity clients as its not worth it financially but this is simply not the case.

    I think one big problem here is that many advisers dont have resources to compete with marketing companies who spend hundreds of thousands every month on getting annuity enquiries in for their salesforce. They are spending time advising not marketing.

    Reply
  • The Specialist At Retirement Adviser group discussed adopting a voluntary code amongst providers of expert help at retirement – this includes both advised and non-advised services.

    The key components of the Code were as follows.

    Responsibility clear
    Be up front about whether the advice means the client takes ultimate responsibility for decision or whether the adviser does.

    Accessible
    Everyone helped no matter how small their pot

    Client’s interest first
    Independent, whole of market review with ceding scheme checked.

    Value for money guarantee
    Consumer never charged unless they are made better off. An explicit fee is agreed whether taken by commission/adviser charge from pension pot or met by client by invoice.

    Clarity
    All advice to the client is in writing, written in Plain English avoiding jargon and clear as to the recommendation or information provided..

    Best outcome achieved
    Consumer must be offered responsible advice where it is reasonable to believe that member may be making a poor choice. Responsible advice has to be demonstrably be the best outcome.

    The Society of Later Life is willing to be the independent guardian of this Code and plans to issue the Code for public consultation later this year.

    SARA asked PICA to work with us on this and to feature those firms who adopt the Code in their directory of advisers. PICA refused to engage on this and were opposed to having any minimum standard other than a FCA license to sell products.

    We have had support for the idea from the FCA Consumer Panel and NAPF. It has been a hard slog to get Government civl servants interested but we may be making some progress here.

    We need to unite with one voice to support policies that will promote expert help to consumers at retirement that aims to deliver best practice solutions.

    Reply
    • Thanks Alan. Was unaware of this. For sure I think the proposals would go a long way in helping. The profile of this work needs raised and I think we need advisers and product providers getting behind it.

      Reply
  • Good stuff Dave.

    As I see it there are two issues:

    1. The playing field between non advised brokers and IFAs isn’t level and needs to be changed

    2. Retirees need better education / information to understand that an Annuity isn’t the only option

    To take each on turn:

    We get 30 – 40 Annuity enquiries each week, not huge compared to the ‘big boys’, but enough to keep us busy. We are nearly always in competition with a ‘non-advised’ broker and during this year have seen some pretty shocking examples of poor practice. I’d therefore like to see the following changes with immediate effect:

    1. Ban commission on non-advised Annuity sales, it’s too large as it is and allows some non-advised brokers to create the illusion that they don’t charge a fee and that their service is free. RDR was supposed to ban commissions, let’s extend that principle to the non-advised Annuity market

    2. Force all non-advised brokers to carry out basic checks on the ceding scheme to ensure no valuable guarantees are being lost. We’ve seen one example where a retiree using a non-advised broker (one of the ‘big boys’) nearly missed out on a 10% guaranteed Annuity rate. Some of the better ‘non-advised’ brokers already do this, they all should be forced to

    3. Ban commission kick-backs from non-advised brokers to clients, why is this suddenly now allowed?

    4. Introduce a required qualification level for employees of ‘non-advised’ brokers and monitor standards more closely. We’ve seen at least one retiree told that his spouse’s health wasn’t relevant; he was buying a joint life Annuity and she’d had a brain tumour!

    5. Force ‘non-advised’ brokers to make it clear which Annuity providers they can use and which ones they can’t. Independent isn’t “most” of the market, or “80%” of the market

    These changes should help to level the playing field between advised and ‘non advised’ brokers and help the public better understand the service they are receiving.

    But, that doesn’t address point 2, which is crucial to achieving better outcomes for retirees, both Dave and Kath rightly point out; not enough people are looking at other options. The first question is all too often “how can I get the best Annuity rate” (assuming the retiree actually does shop around), it should “be is an Annuity right for me in the first place?”

    Kath sums it up perfectly when she says “People don’t know what they don’t know.”

    We need to make financial advice easier to access at retirement, a simplified advice process would help, as would online innovation, links to employers and a campaign to make IFAs seem more accessible to the public and not just for the ‘elite’. After all, for any reasonably sized fund (our average enquiry is £86,000) the fee to an IFA is probably lower than the commission paid to a ‘non-advised’ broker or by going direct.
    We also need to get the message across that an Annuity is far from a risk free solution.

    Education, information and access to advice, all need to be improved.

    Phil

    Reply
    • Great reply phil. I wonder how much support or traction a ban on commission in this space can get?

      Reply
  • This is spot on Dave. There are too many people retiring who don’t know what they don’t know. And yet it seems a percentage of them just aren’t interested in doing anything to change that situation. Online services fill a gap as you say but there is still a perception that it’s cheaper to cut out the middleman and go direct – even though this is one of those instances where it is very much better value in every way to take specialist advice.

    Reply
    • For sure lot of people blindly walking into products unaware they could have a better retirement.

      Reply
  • When does an annuity not become an annuity? Is it a clients attitude to risk, their retirement goals or how much money they have in their fund? I don’t see many advisers recommending fixed term annuities or drawdown on 20k funds.

    In an ideal world everyone, regardless of how much their fund is worth would get impartial independent advice. The reality is that they are not, so how does that change. Is there the appetite in the advice community to give advice to everyone? If the average enquiry was worth 86k then I imagine it would be, but it isn’t and the real average is around a quarter of that. If you were to ask most brokers they would probably tell you their average case size is somewhere between 30-40k. In fact I saw a case today which generated the princely sum of £46 commission (in case you are wondering eligibility for triviality was checked and didn’t apply).

    My personal opinion that a banning of commission might not level the playing field, in fact it could have the opposite effect. The main reasons being that most brokers, having lower operating costs, would simply charge lower fees than most advisers, thus making it even less economical to give advice on “small pots”. The second is a matter of distribution reach. If you can give a better rate or “factory gate price” to a distributor who can sell 500 of your policies , as opposed to someone who sells 50 then you will. The providers make big money on annuities and commercial deals would be struck.

    I agree with all points raised above, better standards and practices are needed in some firms. What I am genuinely interested in seeing is if the mantra is “advice is best” then how is this delivered to everyone and how will it work. Some firms, including mine, are delivering at retirement advice in an affordable way (as well as non-advised); many others are too. Perhaps the answer lies in the broker market (god forbid)….

    Reply
    • Hi Adam

      A few points in response to your blog, probably not a surprise to hear I disagree with some of your points, but there’s no harm in healthy debate, which should make for better outcomes.

      You’re right, not many advisers will recommend Fixed Term Annuities and Income Drawdown for £20,000 pots, generally because, unless there are other significant sources of income in the background, e.g. DB schemes, these solutions are not appropriate for such small pots. But that doesn’t diminish the value of advice. After all, not many advisers will recommend a VCT or other similarly adventurous investment to a first time investor, who has a relatively small capital sum; but this doesn’t reduce the first time investor’s (or indeed first time retiree) need for advice.

      I believe there is capacity and willingness in the advice community to give advice to all comers, we certainly do. I’ve said before that going to a non-advised broker is a better option than going direct, or indeed buying an Annuity from the ceding scheme. However, I passionately believe taking advice is better than both options.

      The answer to reducing advice costs for smaller pots lies in better use of technology and online systems to reduce the time it takes to deliver advice. I’d also like to see a simplified advice process put in place, which would then reduce compliance overheads.

      I’m still far from convinced that banning commission would have a negative effect on the market. It wouldn’t stop Annuity providers from giving better rates to bigger brokers, it would allow consumers to compare options on a like for like basis and it would hopefully mean an end to non-advised brokers taking commission of up to 3.5%. It would also put a stop to some non-advised brokers from claiming their service is free, or that the consumer doesn’t pay for the service.

      If banning commission in the advised market was seen as a positive step I fail to see why it should be allowed in the non-advised space.

      Phil

      Reply
      • Hi Phil,

        Good to hear from you, good points as usual.

        I agree fully with your comments around the delivering of advice through technology, this is something which we do very successfully. We are not just a non-advised broker, we also deliver affordable, accessible and quality advice to our clients.

        The point I am trying to get across isn’t one of anti advice. I have spent my entire working life building relationships with advisers and intermediaries, and as a firm we also believe in advice otherwise we wouldn’t be delivering it.

        What I am genuinely interested in hearing about is how advice is delivered to the mass market; a point which is in danger of being overlooked in the current tabloid frenzy. I do welcome press coverage on annuities, as we all know the lack of awareness on issues such as the OMO is pretty huge. What I find pretty hard to swallow is that when some of the “contributors” to these tabloid press articles, talking about the perils of non-advised, actually offer a non-advised service themselves….the irony!

        Finally re the 3.5% commission. This 3.5% commission becomes a 3.5% fee (same £ outcome) but with the risk of broker getting a better rate for the same fee as the IFA (some IFA models are built on 3-3.5% initial fee). A client would argue that’s comparing like for like but they get a better rate with the broker. I like many in the industry know it’s not just the rate, its also the shape that’s important. The trouble is our clients don’t work in the industry, so perhaps its a matter of education?

        Adam

        Reply
        • Hi Adam, sure phil will respond. But for me there can be some initial screening that could establish if a customer would benefit from advice. And whether or not annuity is best option. My original post covers the types of questions. I don’t think that is too hardy to deliver.

          If we then make the commission taken transparent(if banning doesn’t happen) customers can make a clear decision about the need for advice v the cost. I also agree broker solutions are better than no advice, but is it the best outcome? We should be striving for this.

          I think it’s this kind of debate that can help shape better outcomes.

          Reply
          • Dave,

            Agreed, you are seeking solutions to the issue, which I support wholeheartedly.

            Adam

    • Adam. Some good points. There is of course the point that lots of people have small pots. and annuity probably is the only option. But establishing this before going to broking should happen. So how many people have a small pot but other bigger db pots. Or a number of small pots adding up to a bigger pot (these stats are hard to come by, but I’ve seen some research that suggests average customer has around 3 pension pots ).

      I really think broking sites will have a place but it needs to be clearer. A quick trawl on sites either say outright or suggest the service is free. That is more than a little misleading.

      On the whole broking sites are delivering better outcomes to customers then if they just say with provider. On te he whole that should be welcomed.

      Just feels to me we should be striving for more. Maybe for pots under 30k there should be a govt backed broking site that is genuine whole of market. And free?? Other than needs to comply with codes Alan suggests.

      Reply
      • Thanks Dave. There is lots of challenges, for instance your comments around establishing whether or not annuity is right. How would that be delivered? It would probably have to be free, and if that was the case then probably something like a decision tree would be put forward…..that worked for stakeholder pensions…..!

        I agree there is some misleading messages out there and these are being picked up on more and more, which is good to see as there is definitely good and bad in broking, as with most industries.

        As I said some innovation would be good as well as some focus on the retirement income space as a whole, not just finger pointing at the broker market (not an accusation at you or anyone else, I think you put forward a very balanced view)

        Cheers

        Reply

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