Client knowledge of pension freedoms is still a problem for the financial advice sector, according to the business development director at Tenet Group.
Over 1.3 million people in the UK have taken advantage of the freedoms to access their pension savings since Q2 2015, withdrawing over £21bn ($27.3bn, €23.8bn), according to HM Revenue and Customs (HMRC) stats in November.
Ben Wright told International Adviser there is still more to be done to teach clients that taking their pension pot early may not be the best thing to do.
“Something we do see is around pension freedoms, which have been in place for a while now,” said Wright. “There are potential issues in that marketplace, as originally it was quite along the lines of ‘it is your money, your choice’.
“So, a lot of clients’ starting position is ‘it is my money, I will take it all out’. You don’t really think about the consequences of doing so, and it has been a job for advisers in our industry to educate clients on the basis that it may not be the right thing or time to take it all out, even if you can.
“It is certainly very easy sometimes when you have got a statement that shows a very large number and say ‘great, I will take that straight away’. It could be the wrong thing for you to do.”
This is not the first debate about pension freedoms education, but previously it was about the advisers’ lack of knowledge – not clients’.
In November 2018, IA reported about the “concerning lack of education” on pension freedoms from product and service providers.
But client education is not the only priority for the financial adviser support group.
Tenet recently announced it is replacing chief executive Martin Greenwood, who is retiring later in the spring, with Mark Scanlon, and told IA recently it will not halt its five-year plan, which includes continuing to acquire through its buy-out programme.
Caroline Bradley, group risk and regulatory director, said: “We don’t have a target of assets under management.
“But we are looking for regional hubs because, if we have a hub of employed advisers, it would make sense to buy businesses in that geographical area. It makes it easier to support the clients.
“We are looking at a number of regions around the UK so that we can service clients. Two of the areas we are particularly looking at for hubs is the Edinburgh area and there are several big businesses around London we are talking to as well.
“The firms we are looking to acquire are all Tenet businesses already. We have been telling our members for about 18 months now that we will buy practices where it is appropriate, so they have come forward to us.
“There are some members that actually don’t want to sell now and have said if I want to retire in two years: what would that look like? Just so that we can be part of their plans.”
Tenet’s Bradley expects wider consolidation in the UK market to continue because “it is becoming harder to run directly authorised firms with all of the regulation”.
Regulatory changes over the last few years with Mifid II and GDPR have changed the financial adviser market but Brexit is slowly taking over as the number one priority for the sector.
However, UK-based firms like Tenet will be hardly affected by Brexit, but there are still going to be some clients who will be looking for a local financial adviser if no deal stays on the table come 29 March 2019.
Bradley added: “Most of our clients are UK-based. We have seen how many of our clients do live abroad and its tiny. It is 0.2%.
“It is a possibility we would have to stop servicing those clients, but it depends on what Brexit looks like. If we get this transitional arrangement, we will be able to service clients who live in Europe. If it is a hard Brexit we probably won’t.
“Generally, most businesses will be fine unless they deal with a lot of expats. With UK-based businesses servicing UK clients, the impact will be if there is significant market movement over the Brexit period.
“Even then, we say to our customers ‘you are in this for the long term, do not do anything rash. Just hold your nerve, and if you are long term investor then actually a wobble in the market, it shouldn’t affect your long-term plan’.”