16th October 2012

Prudential: What’s driving your advice decisions…?

Making choices about product providers for your pension clients has been greatly simplified by best advice systems, but is your approach providing you with the right answers?

The old saying of garbage in garbage out can be applied to any systems which require manual intervention to deliver results. So are you making sure that your input delivers what you need to provide advice for your clients?

Don’t let default take control

Many best advice tools have default settings for both funds and commissions, which means unless changes are made early in the process the initial analysis will be made using these default settings. Relying purely on default options will rarely reflect the client needs and may restrict your product choices to those which offer few features or limited fund choices –– so how can extra input give you client specific best advice?

The needs and considerations of your client are at the heart of pensions advice of which cost may be a core consideration, but don’t short circuit the selection process and base product choices on a cost basis using default settings alone.

Get the system working for you

As part of your fact find, you will have assessed and identified your client’s retirement planning needs now and in the future as well as their attitude to risk and capacity for loss. So the output from your provider selection process should also reflect these client specific needs, and be consistent with the work you have put into providing advice.

So the selection criteria should reflect the specific recommendation for each client:

• Use reduction in yield rather than AMC – which will provide a more complete comparison of all the costs which a client will incur.

• Include the adviser charge basis which you have agreed with your client
• Take account of any client requirements for product features now or in the near future e.g. SIPP, Income Drawdown, making sure that any requirements are included in the selection criteria
• Fund recommendation - the selection should be based on the recommended fund choices.

Supporting your advice and services

In the climate of continued regulation and monitoring, a selection report which reflects the advice being provided will provide a better justification for product selection and provide a stronger backbone for your advice.

Default can be a dirty word

These best advice tools can save you time, and choosing selection criteria to match the client needs will provide a valuable output to support the product recommendations which you make - so a default approach is of limited value to you or your client.

Make a best advice system your ally by making sure it reflects your client recommendations – helping you to deliver value and service to your clients.

Stan Russell
Head of Pensions Business Development

Pensions