them towards action could be helpful. But there are practical concerns.
To take a simple example, a pension provider identifies customers aged 60 with pension pots of £ 50,000 or less. Based on its data, it concludes that these individuals are unlikely to have sufficient provision for retirement and prompts them to top up their pension.
On the face of it, that may make sense. But the provider only sees the pots it administers, it doesn’ t necessarily know whether that individual has other pensions elsewhere, additional savings, or property assets they intend to rely upon. Encouraging them to increase contributions might be suboptimal- or even harmful- if it leads them into debt or prevents them meeting other financial priorities.
That raises questions around liability. If a customer follows a targeted support recommendation and later argues that it was not in their best interests, where does responsibility sit? If complaints arise, they may ultimately end up with FOS, a prospect which introduces both financial and reputational risk for providers.
There is also a commercial dynamic to consider. In many cases, the firms delivering targeted support are likely to be large life and pension providers. Encouraging customers to top up their pensions will directly benefit those providers commercially, creating at least the perception of a conflict of interest.
Advising myopically sits uneasily with the principle of holistic advice that underpins our entire profession
I’ m not trying to suggest that targeted support is inherently flawed, and it may well achieve its aim of increased engagement. It may prompt some people to take positive steps who would otherwise have done nothing and, fingers crossed, could even increase awareness of the value of full financial advice.
However, there is another constraint waiting in the wings- capacity. If targeted support communications include the caveat that customers with more complex needs should seek full advice, where do those customers go? The advice market is already operating close to capacity. Many advisers are not actively seeking significant numbers of new clients and technology efficiencies have often translated into better work – life balance rather than a push to serve substantially more clients.
If consumers are encouraged to seek full advice but struggle to find an adviser willing or able to take them on, that could lead to frustration and reputational damage for the sector more broadly.
6 | The Adviser Online