I had a great meeting yesterday with the HR Director of a large company.
The firm has just been going through the process of combining a number of pensions schemes so that all of the employees have a consistent benefits package.
Employer contributions to the schemes are it is fair to say quite generous with double digit contributions as a percentage of earnings.
But like many defined contribution or money purchase schemes, the individual staff member needs to make their own decisions about where their contributions and those of their employer are invested.
The HR Director was telling me that most of the employees don’t have access to an independent financial adviser (IFA) to help them make these important choices. Yet is is an area where the competent adviser could offer a really good and valuable service.
Identifying what attitude towards investment risk the employee has, building a suitable asset class model and then linking that to the fund choices available is a pretty straightforward exercise.
Perhaps because there is no “product sale” involved this doesn’t look like the typical work that an IFA might do and yet it should be.
Of course each staff member would have to pay the price for that advice themselves but it need not be particularly expensive.
In fact the cost of selecting the wrong investment funds (be that either too cautious or indeed too adventurous) is probably going to be much greater than the one off cost of buying suitable advice.
With perhaps millions of people in defined contribution pension schemes more and more of them are going to need investment advice to make sure their contributions and those of their employers work hard for them.
Certainly at Informed Choice this is a service that we offer and we anticipate rising demand.
