Paraplanning in the regulatory age

Paraplanners are reporting that regulatory change is having a bigger impact on advice firm business processes and workloads than ever before. A combination of Consumer Duty compliance and regular changes to tax and savings allowances – the latest being the removal of the pensions Lifetime Allowance – is creating a heavy regulatory burden for advice firms and paraplanners in particular.

70% of paraplanners believe that frequent changes to tax policy and allowances are having a larger effect than ever before on their business processes. The changes to the Lifetime Allowance (LTA) came hard on the heels of Consumer Duty but paraplanners feel they were poorly communicated. A resounding 73% of paraplanners disagree with the statement that the changes to the LTA were ‘communicated in a clear and timely manner by HMRC’.

In fact, 59% of paraplanners do not believe they were given ‘the necessary information and time to give clients the right advice around LTA’. With a further 18% neutral, that means less than one in four paraplanners had a positive experience in dealing with the new LTA requirements, with particular challenges around transitional tax-free cash certificates. While change is always to be expected within financial services, the strength of these results is underlined by the fact that 54% of our surveyed paraplanners have worked in paraplanning for over ten years, adding weight to the view that recent levels of regulatory change are out of the ordinary.

So, what separates paraplanning from the adviser role? Paraplanners believe the main difference is that they require a different skillset, reinforcing the idea that paraplanning is a complementary technical support role to the adviser. A brief scroll through paraplanning recruitment openings confirm this view, with some roles offering the chance for paraplanners to help build financial plans, while other roles require a technical, research or report-writing focus.

Given this backdrop and the fact the Labour party initially said they would reverse the LTA changes (since abandoned, but Chancellor Rachel Reeves has subsequently announced a landmark pensions review), it’s not hard to see why advice firms might think that ad hoc changes to tax and savings policy have become overly influenced by short-term political motivations rather than the unifying challenge of getting UK consumers to save more.* This is certainly borne out by the 67% majority of paraplanners who believe that there should be an independent body setting long-term policy for pensions and investments. Indeed, with a further 15% unsure, only 9% of paraplanners disagree with the need for an independent approach.

So, what is the real impact of all this regulatory change? Drilling down, we can see the largest effect has been on workloads, with 72% of paraplanners reporting a negative impact. It is evident that, as the industry raced to deal with changes to the LTA, paraplanners would have been at the sharp end, working to tight deadlines. In fact, nearly half (49%) reported working up to five hours over their contracted hours per week, with an additional 15% saying they worked five to ten hours more on average. 52% of paraplanners believe that regulatory change has negatively impacted their firm’s cost of doing business.

Around one in four (26%) paraplanners said the burden of regulatory change has also had a negative impact on their mental health, while 22% said it has negatively impacted their desire to work in the industry. Not all impacts where negative however, as 50% of respondents believe there was a positive impact on their ability to deliver value to clients. Increased complexity around pension regulations may increase advice firm workloads, but it also reinforces the need for advice and allows advice firms to better demonstrate their value add.

When asked what was preventing them from adding more value in their role, paraplanners pointed to workloads once again, with two thirds (66%) citing it as the biggest barrier, up from 59% in last year’s survey. A third of paraplanners (33%) cited company structure (up from only 12% last year), with a further 17% highlighting company management as a key barrier to adding more value.

Given the pressure on paraplanner workloads it is reassuring to see that paraplanners still see their role as flexible, with a positive work-life balance. A 70% majority of paraplanners agree that the paraplanning profession presents a greater opportunity for flexibility to achieve work-life balance or meet caring responsibilities compared to other professions. Most paraplanners are able to work from home, with only 18% working five days a week in the office and the most popular balance being two (22%) or three (23%) office days. It is this level of flexibility which can alo help with attracting new blood into the industry.

*For more detail on the extent of the challenge facing UK consumers, see the Scottish Widows Retirement Reports.