This month we spoke with client member Tom Nielsen, AdviceBridge co-founder, a financial services company offering retirement advisory plans to ensure a secure and comfortable future. These plans look at ways to reduce taxes, set up personalised investment recommendations to put your retirement savings on the right track, all at one-tenth of the average UK adviser fee.
We discuss schemes for the self-employed and delve into ways the typical freelancer can prepare for a happy retirement. We also look at how AdviceBridge uses freelancers across their company and what benefits they have seen.
With data science expertise and a background in building predictive analytics-based products, how has this lent itself to create pension plans that ultimately better people’s lives?
We are definitely taking a new approach. Existing practitioners have evolved rules of thumb to determine financial advice for clients. This evolutionary professional practice is not something we look down on, in fact we draw on these rules for developing our algorithms. But the data science based approach does have advantages: when the tax rules change, we can calculate the right advice quickly. For instance, we are expecting significant reforms to the pension system in the upcoming budget, and we expect that to affect the situations in which pensions are the most efficient savings mechanism. Traditional financial advice is geared at clients who are quite wealthy. We don’t expect the same retirement strategies to apply to savers on an average income.
A second approach commonly used in finance is based on mathematical finance which dominates institutional finance and derivatives pricing. This analytical work is elegant and gives a lot of insight, but we find that it is difficult to apply within the complicated tax rules that apply to income tax and pensions. Using data science, we can make decisions within very complex tax rule systems.
Self-employed freelancers won’t be enrolled in a workplace pension scheme, what is some advice you could give to freelancers so that they can start putting money aside for a happy retirement?
Freelancers are not subject to auto-enrolment but will need the same savings as full-time employees when they retire. And for most employees, the pension savings from auto-enrolment are insufficient and unless supplemented by additional savings, are likely to lead to a less comfortable lifestyle in retirement compared to working life. But freelancers have some more flexibility in their savings options. For instance, they can use a Lifetime ISA, which can be a more efficient and flexible savings vehicle for basic rate taxpayers. Freelancers who have incorporated can still use a workplace pension very effectively, and others can set up a SIPP from a variety of low-cost platforms.
In one of your articles, you discuss how a ‘spectrum of deceit’ has evolved in the pensions industry. How has this happened and how does Advice Bridge tackle this issue?
This is a huge issue for us. The distrust in the pensions industry is largely a byproduct of pensions freedom. It spans from fraudsters impersonating your bank, through unscrupulous advisers as seen in the British Steel pension transfer scandal, to a growing realisation that high fees and financial advice are not always justified.
As a firm we are committed to being open and transparent with our pricing and service. By unbundling financial advice from selling financial products such as platforms and funds, and charging only for advice, we have removed conflicts of interest and focus only on helping our clients to reach their goals.
What do you think the benefits are working with freelancers, and how do you use them within the company?
Cost and budget are factors, but there are more important considerations. We have had a really good experience working with both technical and professional services freelancers. We have a core of employees and outsource everything else to freelancers. This means that we can focus on the essentials. Working with freelancers allows us to employ great talent with the right skills at the right time. Being a small organisation it obviously does not make sense to have an inhouse expert for everything.