WPS Advisory Limited: Changing the face of retirement and financial advice in the UK

The UK is facing significant challenges, with the impact of an ageing population being exacerbated by a mix of Brexit and Covid.

Further back in time you have the compounding impact of employers closing what were known as final salary pension schemes, firstly to new employees and then all employees. Add in the changes to state pensions, including increasing retirement age, and there has been significant worsening of retirement provision.

Many of those decisions were made over 20 years ago. These generous final salary schemes have been replaced by low levels of saving into money purchase schemes. To keep it simple if less money goes in then less money comes out.

In the past individuals, benefiting from a generous mix of state and em- ployer benefits meant people not only had enough money to retire, the standard of living was generally good and the money would keep on being paid to the individual right to the point they died, and after could be paid to a beneficiary.

Individuals reaching retirement right now are finding that they do not have enough pension savings, so when looking at how they reward themselves for a lifetime of hard work they look to wider assets. Our 2022 data showed that, for the first time, the value of the equity in the individual’s home represented more than 50% of their total assets.

In this environment the old ways of providing advice are simply not fit for purpose. There are three primary reasons for this:

• Financial advice was often financial sales in disguise;
• Financial advice has and to a large extent continues to be a service offered to those considered rich, with advisers looking to earn a % of the clients assets placed into investments;
• Lack of trust due to perceived and actual poor quality of advice and service, driven by the vested interests of advisers and providers.

To address this a new type of financial adviser had to emerge. This adviser had to do two things:

• Talk to people in a way they could understand;
• Remove or reduce the barriers which stopped consumers actively en- gaging with advice, primarily: – Cost; – Trust.

WPS Advisory has its roots back in 2015. Its approach to engaging with consumers was very different because it sought to provide advice via the workplace and / or via the pension scheme.

This approach first required us to be able to persuade employers and pension scheme trustees that not only was our service needed, but also we could be trusted to provide high quality and tailored financial advice that gave value for money.

The value for money equation was actually the easiest to address, be- cause the learning from a single source about the employer and scheme level structures created economies of scale that could be shared across employees and pension scheme members.

More challenging was evidencing to a potentially cynical audience that a financial adviser firm could always be trusted to do the right thing. That challenge exists even now.

We had to change the language so that employers and trustees could recognise what an adviser needed to achieve in order to demonstrate they were doing their job properly, in a way that could be trusted.

We did this by simply pointing out that the bar set for financial advisers had always been misunderstood. It was not simply their obligation to provide advice, technically called a “Personal Recommendation”; it was their job to create and evidence informed decisions, which bluntly is a much higher bar to hit.

Alongside these challenges was fast evolving regulation designed in the face of negative consumer outcomes, for example, in advice provided to members of the British Steel Pension Scheme.

There is a positive outcome because not only do we provide access to advice for many of the largest employers and pension schemes in the UK, but also much of the advice is promoted and paid for, thus addressing the twin challenges of trust and cost.

Since 2015 we have engaged with over 100,000 consumers in relation to their retirement planning, during a period of significant regulatory focus and thus regulatory interactions.

Part of being trusted is acknowledging you are never perfect, ensuring you constantly learn and evolve, all the time taking responsibility for the work you do.

We see that trust as meeting the “sleep at night” test, which is all about knowing fees are fair, hard earned and relate directly to helping the consumer achieve their objectives, their needs and wants, in the context of their values. It must always be contextualised by the individual’s experience of managing money and life risks, their capacity for and reaction to loss and where appropriate their attitude to investment risk.

For the avoidance of doubt, for many people that means making plans that actively avoid them having to take risks or make investment decisions they do not understand.

WPS Advisory CEO, Simon Chrystal explained:

“Our customers want to reward themselves for a lifetime of hard work by having a comfortable future. For many, if they were invested then they would be checking their assets every day before deciding how to live their lives, worrying all the time. That is not enjoying the rewards for a lifetime of hard work, it is retirement purgatory.

A core human behaviour is making decisions without even knowing you have done so, with emotion and bias influencing each choice. This means the plans an adviser puts in place must be clearly understood by the customer themselves, especially any risks they are taking. They should be largely able to manage those plans without thinking too hard. The idea that you can somehow remove emotion and bias from human decision making, give advice that is essentially developed in a test tube, then exposed to the reality of the real world while expecting the out- come experience to match expectations is, quite frankly, a nonsense. Yet a whole industry has been encouraged to believe this is how it can and should provide a service.

This is where we will create and deliver change.”

A good start has been made and in 2020, for the first time, WPS Advisory was listed in the top 100 financial advice firms in the UK.

There is much more to do. Recently developed is the ground breaking and wholly unique “Who am I” programme which seeks to ensure the framework for the individual’s plan is set out in their own words right at outset, thus ensuring it is never about a product or a sale.

The “Who am I” programme also examines the consumer’s understand- ing of key risks as they arise and how they can be managed.

The key is not simply in learning how the consumer wants to live their life; it is in learning how they communicate and ensuring every communication is tailored to their understanding. This means truly creating and evidencing informed decisions in a way never done before.

With its ageing population, emerging labour crises and economic challenges, the UK needs this new type of adviser now more than ever. To varying degrees, the same need exists across many of the so-called developed economies.

We are launching our “life-stage advice” strategy via the workplace in 2023 with this need in mind. This allows employers to focus on retention of their people, retention of core skills, in a competitive market and thus manage supply-side risk. It does so by allowing us to do the one thing we can do that many others cannot:

We simply talk to regular people, irrespective of where they sit in their career path or stage, in a way they understand. We ensure they know what they have and how best to use it in looking after their families and loved ones.

Everything we have seen shows this builds loyalty, commitment, mutual trust and a long-term working relationship.