Advisers can open doors with auto enrolment solution
Matthew Walne, director of Santorini Financial Planning and the Auto Enrolment Advisory Group, explains where the current opportunities for financial advisers lie in auto enrolment and why he’s in the market
A lot of employers have underestimated auto enrolment and realised it isn’t as straightforward as they thought it would be. It’s so much more than just having a qualifying pension in place too. In fact choosing a qualifying pension scheme is just one of 33 tasks.
The statistics are proving this. Judging by the fact The Pension’s Regulator has investigated 900 employers and found 58% of these contained breaches and 163 actions have been taken including fines.
It takes about 108 full working days to prepare for auto enrolment and up to three full days a month ongoing. Most small firms don’t have the resources to pay for someone to advise them or the time to learn everything they need to know.
Bearing in mind the 900 employers investigated were all larger firms with HR departments and accounts departments, the problem will be a lot worse in the SME market when it’s likely to be one person who does all that and maybe even the payroll too. More than 1.25 million employers will need to comply with their new workplace pensions over the next three years. I would argue that SME and Micro employers need all the help they can get but where are they going to get this from?
Also, information from pension providers suggest 90% of data uploads from employers are incorrect. Despite all the hype and claims from some payroll and software providers, they don’t check the quality of the data. Even with RTI, most payroll data is full of errors.
Some payroll software can usually help with some of the tasks and even provide some of the statutory communications but payroll software alone won’t fulfill all the employer duties.
What is the cost to an employer to put that all right? In terms of time and money?
Where financial advisers should focus
In any event most employers will turn to their accountant for help, especially if they run their payroll for them. This in my opinion is where advisers need to be looking to add value, helping accountants. I’m not sure that offering a full consultancy service to SME and micro employers will reap many rewards for financial advisers as most won’t be able to pay the fees and you will be limited to how many employers an advisory firm can look after.
What employers are looking for is to ensure they are complaint so they need guiding through all the tasks. They don’t necessarily expect their accountant or financial adviser to do it all for them. The solution is to provide a streamlined, simplified solution. Along with Bridget Greenwood and Chris Daems, we think we have done that with AE in a Box®. Empowering employers and giving them all the tools to do the job themselves without the huge costs will serve the majority of the SME and micro firms.However, directors still need bespoke pension advice and the spin offs in terms of employee benefits, key man and shareholder protection are huge. This is one of the main reasons I’m in the auto enrolment market, although auto enrolment advice needs to be profitable in it’s own right.
Not a FCA regulated activity
It’s important to remember that auto enrolment and advising clients on the main master trusts isn’t a FCA regulated activity so you can make life easier for yourself by simplifying the process and duplicating it on mass.