Looser regulation needed as over-65s shun advice
Looser rules about financial advice could be necessary, as research shows more than half of over-65s have never sought regulated advice.
The introduction of the freedom and choice reforms last April has increased the need for advice among pension savers, but the high price of regulated advice, and reticence on the part of trustees to provide guidance that might be seen as advice, creates a disconnect that ultimately places savers at a disadvantage.
Steven Cameron, regulatory strategy director at provider Aegon, said the Financial Conduct Authority and the Treasury should recognise a distinction between holistic advice, which covers all of a customer’s needs, and focused advice, which only applies to a specific topic.
There is a need to help educate all levels of consumers in society, starting from a really young age
Giving a forward-looking example of advice limited to one topic, Cameron said: “[It] might be advice on selling an annuity on the secondary annuity market.”
He added that different regulation for such advice could encourage the development of more dedicated advice.
Cameron’s comments came after research commissioned by stairlift manufacturer Stannah found that 54 per cent of people aged 65 and over have never sought financial advice.
However, 19 per cent said they do not believe they will be financially secure throughout their whole retirement and 24 per cent said their financial situation is worse than they expected it to be when they were 45.
The survey, part of a series titled ‘Silver Census’, used a sample size of 1,004 people aged 65 and older.
Financial Advice Market Review
The FCA and Treasury are in the process of conducting the Financial Advice Market Review, looking at the advice gap and how to encourage both advice providers and consumers to help plug it.
Cameron said it was also important to ascertain the point at which the advice gap was biting, as the proposed solutions would need to differ “if the advice gap is around not saving enough for retirement or how to spend the pot you’ve built up”.
Research from Aegon last year showed that while freedom and choice was improving retirement readiness among savers, only 8 per cent of people were on track to receive the income they aspire to in retirement.
Jonathan Watts-Lay, director at financial education company Wealth at Work, said savers often assume they will not need advice and fail to understand the number of factors in calculating their needs during retirement.
Source: Aegon
“Ask if they need advice, most people will say no, but if you do an education programme, spend a few hours talking about all the things they need to think about… if you do that seminar and ask people if they would like advice, typically 60 per cent to 70 per cent say they want [it],” he said.
Charles McCready, programme director of the Savings and Investments Policy Project at the Tax Incentivised Savings Association, said financial advice providers needed a guidance framework to clarify the line between guidance and advice.
He added that the cost of financial advice was an obstacle to wider use by consumers, which prevents a culture of advice spreading across wider demographics.
“One of the big problems is the cost and perception that for them it’s too expensive for the pot they have… We think there is a need to help educate all levels of consumers in society, starting from a really young age.”
Amanda Barnett, an independent financial adviser, agreed that pension planning should start at a younger age.
“Retirement planning needs to begin well in advance of actual retirement, and this should include seeking professional advice,” she said. “This research by Stannah Stairlifts clearly shows that this is not happening, which is a worrying finding.”