Figures from Aegon in April now put the average retirement nest egg at £50,000, swollen by a change in habits following the introduction of pension freedoms two years ago. But this figure is still barely enough to interest many advisers today.
At the same time, pension liberalisation now means that millions of people with small pots, who would previously have bought an annuity, are trying to plan 30 years of their financial future with a dearth of advisers available to help.
That banks have chosen now to return to advice is testimony to the strength of the opportunity they see in the current market, despite painful histories and the stricter regulatory environment – their new advice services are pitched exactly at people with the average post-pension freedoms pot: assets of around £50,000.
Unlikely support for banks’ return has also come from the FCA and the Treasury, which are ushering the former black sheep back into the fold after realising the dire need for advice following the introduction of their respective overhauls.
In June, the FCA revealed that Lloyds, NatWest, Santander, HSBC and Nationwide made up half of the first group of companies that are working with its advice unit – set up as part of a joint initiative with the Treasury specifically to work with the industry on ways to help broaden access to financial advice.
Several of the banks are working with the regulator to offer some form of automated advice that is crucially cheaper than face-to-face services, but expected to adhere to the same standards.
Although not on the advice unit list, RBS has announced that it will launch an online only robo-advice service allowing customers with as little as £500 to invest.
Necessary checks
There is hope that the checks and balances of the stricter regulatory regime will keep the banks in line this time around.
“I think the whole culture of financial services has dramatically altered since 2008,” says Claire Walsh, chartered financial planner at Aspect8.
“RDR raised the bar from a qualification perspective and transparency of fees and demands greater professionalism. And I strongly believe that more people offering good quality advice services is good for the industry as a whole.”
Anna Sofat, chartered financial planner at Addidi Wealth, agrees, citing the added deterrent of regulation introduced in March that makes bank bosses more directly responsible for bad practice.
“I am hoping that with the new senior managers regime, the penalty for allowing bad advice might be too high for many middle and senior managers to want to be lax about regulation.”
For its part, the banking sector is pledging full rehabilitation.
