Will the slashing of fees exacerbate the advice gap?
Technology is a wonderful thing, but it is not something that has been applied with any great skill or diligence in the pensions arena.
Few schemes can truly claim their communications to be totally 21st century in nature, but then again we are communicating with a population that has – in most, but not all cases, metaphorically – stuck their fingers in their ears.
Just as a child has to be encouraged – sometimes dozens of times – to eat their greens, a member must be gently persuaded to engage with their benefits
For this reason we are told to communicate more frequently across every known platform that is likely to titillate our audience, because that is how you ‘engage’ people these days.
Engagement is really only persistent communication and will be the precursor to any member taking advice. After all, they need to know they may have a cause for getting advice, and they cannot get that from their schemes.
Low cost does not guarantee value
The gradual appearance of robo-advice may seem to be the Holy Grail. Robots don’t need to eat, sleep, go to the loo and don’t require pensions, either.
Robo-advice will slash the cost of providing advice for schemes desperate for their members to do the right thing, but that are unwilling and unable to be seen to be giving advice themselves.
The arrival of the pensions dashboard will further revolutionise communication, by bringing all of an individual’s pension information into one place.
But don’t hold your breath. That is a project unlikely to succeed until the application programming interfaces being developed for open banking – and that will revolutionise the secure sharing of personal data – have landed.
The project is further hampered by being in the hands of industry and government, where one party does not really want it and the other is incapable of delivering it.
Robo-advice is not the same as being face to face with a regulated financial adviser who has a full understanding of their client’s financial position. So while the cost of advice is reduced, what exactly is the value of this ‘advice’?
This is not semantics, either, but about value for the member – something the regulator is very hot on these days.
So perhaps we should focus on what we – not robo or the dashboard – can do for our members.
Currently, schemes are advised to push members to third parties for fear of being seen to offer advice. The trouble is, Pension Wise and the Money Advice Service do not offer advice either, but more generic guidance.
These services – and to an extent a lot of robo – are underpinned by simple decision trees. The questions members ask are simply too hard for those black and white scenarios. This is why as soon as any nuance enters the discussion, your members are sent back to the scheme.
For this reason, we must not see technology as an answer in itself, but the means to finding our own response. Unfortunately that is going to take an awfully long time.
Nothing can beat the drip, drip effect of targeted comms
Just as a child has to be encouraged – sometimes dozens of times – to eat their greens, a member must be gently persuaded to engage with their benefits. I say that not only as a trustee, but as a member. I don’t want to read the kind of communications we all send out when there is something less important to distract me.
The jury is still out on robo-advice
The pensions industry must focus on technology and consumer engagement to keep up with changing demographics and work habits, but opinions are divided over whether robo-advice is the best solution.
It is not the way you tell them, but how often. We need to rely less on inertia alone to move our members and more on targeted and segmented communication and even serendipity – that our regular message eventually lands in the right place at the right time for the member to make an informed choice.
Nothing can beat the drip, drip effect of targeted engagement, and schemes that want their members to arrive at retirement with a meaningful fund know they will have to communicate little and often to win hearts and minds.
‘Never mind the quality, feel the width’ is not the basis of good governance. While robo will revolutionise the ways in which generic ‘advice’ can be communicated, it will not address the advice gap.
Even if it does begin to ford that stream for the general population, you will have to decide whether it truly offers value for the members of your scheme.
Pádraig Floyd is a committee member of the Association of Member Nominated Trustees