Advisers can also see the total cost of what they do and the external services that they use, and can package the charges to clients accordingly.
Brave new world
The pension freedoms experience in April 2015 (and ongoing) is a defining moment, dragging some providers, dare I say kicking and screaming, into a new world of technology and customer service. In a world where customers expect ‘instantaneous’ responses, this has been a real test for some of the old legacy pension systems.
This gives the industry a chance to showcase how platforms can really assist in the new retirement world, helping both the adviser and ultimately the consumer – the retiree who wants to take advantage of the new freedoms. This assistance can come in a number of ways.
For a several years now, retirement planning has been more than just pension planning. It involves a combination of all financial assets and looks at how to extract money in the most efficient way.
This has generally manifested in the platform world by being able to line up different tax wrappers, such as pensions, ISAs and life assurance bonds (onshore and offshore) in such a way that they can be used in tandem and in the most efficient manner.
If required, an investment strategy and allocation can also be made across the wrappers. As a consolidation tool, platforms can add real efficiency across the board. This will be even more important in the future with new product wrappers, perhaps even a pension ISA.
Another key will be access to investments. Platforms can provide easy access to many different investments, and the ability to quickly and efficiently build a portfolio across as many different tax wrappers as required.
As in the US, we will see a number of different investment strategies driving true retirement planning, perhaps with short-term assets meeting short-term needs and long-term assets earmarked for longer-term income requirements.
This might involve using different types of investments, be they OEICs, investment trusts, ETFs, active and passive investments or direct investment into equities. As the investment world changes, different investments will fall under the spotlight and platforms will need to be able to adapt to changing investment themes.
A fork in the road
A final area where I expect platforms will come into their own is in tax planning and reporting.
The ability to combine tax allowances and thresholds to draw income efficiently should become one of the real value-added services advisers can offer. Optimising allowances and bringing forward or deferring income could be of real advantage, and platforms offering tax wrappers may be best placed to facilitate this.
My last point is perhaps something of a double-edged sword. Let’s look forward a few years – if pensions do change structure and become more like ISAs then there is the danger that we will have to operate a TEE pension system alongside the EET regime, unless there is some way of transitioning between the two.
We may have two totally different tax regimes, one taxed on withdrawal and one tax-free, but I feel confident that most platforms would be able to manage them relatively efficiently.
