My opinion is that some knowledge is better than no knowledge, and the important part of Guidance is actually what the retiree does after receiving it
Chris Prior was formerly manager, sales and distribution, Bridgewater Equity Release
Guidance, guidance, guidance you can’t escape references to Guidance within the pages of every single financial services trade magazine and website, and increasingly so in the mainstream media. This is because we are but a few weeks away from the introduction of the pension freedoms for new retirees and therefore the introduction of Guidance for these very same people.
However, the big unknown is how many eligible people will actually take up the offer of free Guidance , as it seems that those charged with its provision are certainly anticipating a busy time, particularly during April. I read recently that Pension Wise staff have already forfeited taking any holidays during the first month of the service which shows some level of commitment to the cause. That said, the staff at The Pension Advisory Service (TPAS) – those who will be providing telephone Guidance - are only targeted to have five appointments a day so they might not need much of a break less than a month into the new regime.
The construction of Guidance, and what it actually does and doesn’t cover, is still something of an unknown entity. We know it’s certainly not ‘advice’ as George Osborne initially announced and if retirees are expecting a full belt and braces approach then, at least judging by Steve Webb’s recent comments, they are going to be sorely disappointed. When talking about what Guidance won’t be, he was recently quoted as saying: “...[it] is not bells and whistles, this is not financial advice. You do not come out thinking ‘right I am going to buy that product from that provider’ but you come out of it better than when you went in.”
If the threshold for the success of Guidance is set at a level whereby the retiree comes out knowing more than they went in knowing, then I suspect somewhere down the line Guidance is going to be hailed a startling success. For instance, if I go into Guidance not knowing that I can take 25% of my pension pot out as cash tax-free, or if I go in never having heard of equity release and come out being aware that I can release equity from my home, then has Guidance done the job it was set up for?
I doubt many people, particularly from the financial services professions who are funding the service, will think it has been money well spent. However, my opinion is that some knowledge is better than no knowledge, and the important part of Guidance is actually what the retiree does after receiving it. Because, quite simply, as Steve Webb says above they will not have any product information or any clear idea about what option is best for them individually. They will certainly not know how much they need to fund their retirement living, how their benefits might be impacted or the potential damage they might do by choosing an altogether inappropriate option.
And this is where advisers come in to earn their corn, and to act as an absolutely vital part of the process if we don’t want to see many, many individuals making the wrong choices. Guidance gets the individual a step or two further down the retirement choice path but there are many, many more steps to take before they can reach their ultimate destination.
For equity release advisers, I suspect we will continue to see a growth in interest in the products, however this doesn’t mean that more strings to the bow can’t be added. After all, we’re currently unaware if property wealth is going to be discussed within Guidance – if it is, then equity release interest might develop, if not then it’s a simple case of you can’t know what you don’t know. Specialist advisers therefore need to develop their offerings but also ensure they develop their relationships – now is the time to become the go-to adviser for those peers who do not cover equity release, or to develop those introducer relationships with other professions who are also likely to have more interaction with the post-Guidance newly-retired, such as accountants, solicitors, etc.
From April, the situation with Guidance and the impact it has will begin to look much clearer than the murky waters we are peering into at present. Take-up may be brisk but clarity around the information individuals take away with them may not be there. Let’s ensure we as a sector are able to fill that information vacuum and to, mix my metaphors, be there to put advice meat on the Guidance bone.
