Help required - opinions sought.
Discussion
As some of you might know, I became embroiled in something a year ago, which has had repercussions in the business of transferring a client’s Defined Benefit pension to a Defined Contribution one. The matter involved a few score steelworkers in South Wales who (allegedly) were wrongfully transferred from the occupational schemes into an unsuitable Defined Contribution one, to their detriment. The purpose of this thread is not to reflect or comment on the alleged many failings in the distribution and organisational chain from top to bottom.
However, my question is this.
If we assume that the system does have significant shortcomings in it, would you, as the member transferring from the DB scheme, mitigate your worry and concern by having your adviser’s file be anonymised and then submitted to a scrutinising body (one that has no skin in the game) to ensure that the case has been presented to you *as it should have been*?
That last bit is important - the file checker would not be looking at the file and sucking in through his teeth and telling you ‘mate, are you maaaa’ad?’, but would instead cross reference the documents and say, ‘yes, the matter of risk was correctly discussed with you’, ‘yes, the costs and charges were correctly disclosed’, ‘yes, as it stands, the fund is broadly suitable for someone in your circumstances’, ‘yes, your aims and objectives are consistent with being met by this solution’.
The liability for the advice still rests with the adviser - but you, as the naive client, are having his/her work given the once over. The cost would be somewhere in the region of £150; a cost which might be part born by the scheme member (you), the scheme trustee who might be looking to discharge their duties better and lower their indemnity, the sector, government - in proportions to be addressed. It would also raise the standard of the process with some advisers, trustees and some providers.
The benefits are that it could drastically reduce the cost of sustaining the financial services compensation scheme levy (a cost that is past on to everyone), improve the quality and standard of advice, and most importantly of all, improve outcome for pensioners and their families. No one wants to see losses result from sharp or incompetent service. It would nip problems in the bud, becausevthe client would go back to the adviser and say ‘mate, you have got nine greens out of a possible ten, but can you clarify/expand this part for me?’.
Based on the clarification, the client might say ‘jeez, you never told me that - sorry, but I’m staying put’. Or he may not. But he won’t be able to say he didn’t make his mind up armed with the corrrect facts.
So, in principle;
1. Do you think the idea of the final objective check is a good one?
2. Do you think the price is fair?
3. Do you think the scheme member (you!), if viewing it as some form of insurance (as a flightline mechanic might give a departing jet a quick once over inbetween it taxiing and hurtling down the runway), would think it’s a sensible idea - given the scheme transfer value itself might be worth hundreds of thousands of pounds.
All thoughts are welcome, the matter is in the early stage of being staffed through various organisations, and soon, I’ll be presenting/pitching to the regulators and would appreciate adding some colour in the form of feedback. I can rely overwhelmingly on a few dozen steelworkers, but they are men wise after an event. I need to tap into the mindset and sentiment of people who aren’t as vividly scarred by a similar experience.
Many thanks,
Al Rush.
However, my question is this.
If we assume that the system does have significant shortcomings in it, would you, as the member transferring from the DB scheme, mitigate your worry and concern by having your adviser’s file be anonymised and then submitted to a scrutinising body (one that has no skin in the game) to ensure that the case has been presented to you *as it should have been*?
That last bit is important - the file checker would not be looking at the file and sucking in through his teeth and telling you ‘mate, are you maaaa’ad?’, but would instead cross reference the documents and say, ‘yes, the matter of risk was correctly discussed with you’, ‘yes, the costs and charges were correctly disclosed’, ‘yes, as it stands, the fund is broadly suitable for someone in your circumstances’, ‘yes, your aims and objectives are consistent with being met by this solution’.
The liability for the advice still rests with the adviser - but you, as the naive client, are having his/her work given the once over. The cost would be somewhere in the region of £150; a cost which might be part born by the scheme member (you), the scheme trustee who might be looking to discharge their duties better and lower their indemnity, the sector, government - in proportions to be addressed. It would also raise the standard of the process with some advisers, trustees and some providers.
The benefits are that it could drastically reduce the cost of sustaining the financial services compensation scheme levy (a cost that is past on to everyone), improve the quality and standard of advice, and most importantly of all, improve outcome for pensioners and their families. No one wants to see losses result from sharp or incompetent service. It would nip problems in the bud, becausevthe client would go back to the adviser and say ‘mate, you have got nine greens out of a possible ten, but can you clarify/expand this part for me?’.
Based on the clarification, the client might say ‘jeez, you never told me that - sorry, but I’m staying put’. Or he may not. But he won’t be able to say he didn’t make his mind up armed with the corrrect facts.
So, in principle;
1. Do you think the idea of the final objective check is a good one?
2. Do you think the price is fair?
3. Do you think the scheme member (you!), if viewing it as some form of insurance (as a flightline mechanic might give a departing jet a quick once over inbetween it taxiing and hurtling down the runway), would think it’s a sensible idea - given the scheme transfer value itself might be worth hundreds of thousands of pounds.
All thoughts are welcome, the matter is in the early stage of being staffed through various organisations, and soon, I’ll be presenting/pitching to the regulators and would appreciate adding some colour in the form of feedback. I can rely overwhelmingly on a few dozen steelworkers, but they are men wise after an event. I need to tap into the mindset and sentiment of people who aren’t as vividly scarred by a similar experience.
Many thanks,
Al Rush.
You've detailed an audit..... Its pre-existing for firms of a reasonable size, and would certainly be a regulatory sign-off criteria for a significant undertaking.
Should all small advisors be subject to a similar level of external control - yes; but think you are significantly under costing the work - there will also be a question of indemnifying the auditor. 150quid buys a cursory glance - you'll just be moving the problem elsewhere. Box ticking may substitute for good advice (for less worthy advisors), the control has to be relevant and significantly improve safety (IMHO).
I think a frequent deep dive on a random set of "advices" would be required; so think the cost has to be higher.
The big4 will commoditise this at some point, sell the idea quick...
Should all small advisors be subject to a similar level of external control - yes; but think you are significantly under costing the work - there will also be a question of indemnifying the auditor. 150quid buys a cursory glance - you'll just be moving the problem elsewhere. Box ticking may substitute for good advice (for less worthy advisors), the control has to be relevant and significantly improve safety (IMHO).
I think a frequent deep dive on a random set of "advices" would be required; so think the cost has to be higher.
The big4 will commoditise this at some point, sell the idea quick...
Ginge R said:
As some of you might know, I became embroiled in something a year ago, which has had repercussions in the business of transferring a client’s Defined Benefit pension to a Defined Contribution one. The matter involved a few score steelworkers in South Wales who (allegedly) were wrongfully transferred from the occupational schemes into an unsuitable Defined Contribution one, to their detriment. The purpose of this thread is not to reflect or comment on the alleged many failings in the distribution and organisational chain from top to bottom.
However, my question is this.
If we assume that the system does have significant shortcomings in it, would you, as the member transferring from the DB scheme, mitigate your worry and concern by having your adviser’s file be anonymised and then submitted to a scrutinising body (one that has no skin in the game) to ensure that the case has been presented to you *as it should have been*?
That last bit is important - the file checker would not be looking at the file and sucking in through his teeth and telling you ‘mate, are you maaaa’ad?’, but would instead cross reference the documents and say, ‘yes, the matter of risk was correctly discussed with you’, ‘yes, the costs and charges were correctly disclosed’, ‘yes, as it stands, the fund is broadly suitable for someone in your circumstances’, ‘yes, your aims and objectives are consistent with being met by this solution’.
The liability for the advice still rests with the adviser - but you, as the naive client, are having his/her work given the once over. The cost would be somewhere in the region of £150; a cost which might be part born by the scheme member (you), the scheme trustee who might be looking to discharge their duties better and lower their indemnity, the sector, government - in proportions to be addressed. It would also raise the standard of the process with some advisers, trustees and some providers.
The benefits are that it could drastically reduce the cost of sustaining the financial services compensation scheme levy (a cost that is past on to everyone), improve the quality and standard of advice, and most importantly of all, improve outcome for pensioners and their families. No one wants to see losses result from sharp or incompetent service. It would nip problems in the bud, becausevthe client would go back to the adviser and say ‘mate, you have got nine greens out of a possible ten, but can you clarify/expand this part for me?’.
Based on the clarification, the client might say ‘jeez, you never told me that - sorry, but I’m staying put’. Or he may not. But he won’t be able to say he didn’t make his mind up armed with the corrrect facts.
So, in principle;
1. Do you think the idea of the final objective check is a good one?
2. Do you think the price is fair?
3. Do you think the scheme member (you!), if viewing it as some form of insurance (as a flightline mechanic might give a departing jet a quick once over inbetween it taxiing and hurtling down the runway), would think it’s a sensible idea - given the scheme transfer value itself might be worth hundreds of thousands of pounds.
All thoughts are welcome, the matter is in the early stage of being staffed through various organisations, and soon, I’ll be presenting/pitching to the regulators and would appreciate adding some colour in the form of feedback. I can rely overwhelmingly on a few dozen steelworkers, but they are men wise after an event. I need to tap into the mindset and sentiment of people who aren’t as vividly scarred by a similar experience.
Many thanks,
Al Rush.
I think the concept is sound, but will lead to higher costs and potentially extended timescales for these transfers, adversely impacting the members that you are trying to protect.However, my question is this.
If we assume that the system does have significant shortcomings in it, would you, as the member transferring from the DB scheme, mitigate your worry and concern by having your adviser’s file be anonymised and then submitted to a scrutinising body (one that has no skin in the game) to ensure that the case has been presented to you *as it should have been*?
That last bit is important - the file checker would not be looking at the file and sucking in through his teeth and telling you ‘mate, are you maaaa’ad?’, but would instead cross reference the documents and say, ‘yes, the matter of risk was correctly discussed with you’, ‘yes, the costs and charges were correctly disclosed’, ‘yes, as it stands, the fund is broadly suitable for someone in your circumstances’, ‘yes, your aims and objectives are consistent with being met by this solution’.
The liability for the advice still rests with the adviser - but you, as the naive client, are having his/her work given the once over. The cost would be somewhere in the region of £150; a cost which might be part born by the scheme member (you), the scheme trustee who might be looking to discharge their duties better and lower their indemnity, the sector, government - in proportions to be addressed. It would also raise the standard of the process with some advisers, trustees and some providers.
The benefits are that it could drastically reduce the cost of sustaining the financial services compensation scheme levy (a cost that is past on to everyone), improve the quality and standard of advice, and most importantly of all, improve outcome for pensioners and their families. No one wants to see losses result from sharp or incompetent service. It would nip problems in the bud, becausevthe client would go back to the adviser and say ‘mate, you have got nine greens out of a possible ten, but can you clarify/expand this part for me?’.
Based on the clarification, the client might say ‘jeez, you never told me that - sorry, but I’m staying put’. Or he may not. But he won’t be able to say he didn’t make his mind up armed with the corrrect facts.
So, in principle;
1. Do you think the idea of the final objective check is a good one?
2. Do you think the price is fair?
3. Do you think the scheme member (you!), if viewing it as some form of insurance (as a flightline mechanic might give a departing jet a quick once over inbetween it taxiing and hurtling down the runway), would think it’s a sensible idea - given the scheme transfer value itself might be worth hundreds of thousands of pounds.
All thoughts are welcome, the matter is in the early stage of being staffed through various organisations, and soon, I’ll be presenting/pitching to the regulators and would appreciate adding some colour in the form of feedback. I can rely overwhelmingly on a few dozen steelworkers, but they are men wise after an event. I need to tap into the mindset and sentiment of people who aren’t as vividly scarred by a similar experience.
Many thanks,
Al Rush.
Would this be compulsory for all IFAs involved with DB schemes?
What happens to IFAs if their reports ‘fail’ the scrutiny of the review?
As stongle has outlined, I’m sceptical about the charge quoted - these proposals are likely to lead to additional work for the IFA involved, which they would probably need to charge the client for and £150 doesn’t feel like very much for an experienced advisor to provide a credible review of the paperwork etc, as well as associated admin costs.
Edited by sidicks on Thursday 23 August 11:59
Both,
Thank you.
It’s an external audit+.
There has to be agreement that the process has failed - not because it’s inherently bad, but because (like any process) it’s only as strong as its weakest link. We are cutting off an hand to save an arm. We are saying,this is going to make life difficult, but it’s going to save money for us and the client, will restore confidence in the system, and raise standards all round. After all, why would a corrupt adviser use a favoured poodle provider if he/she knew that the file would have to be validated anyway, by a third party?
The process would be external, mandatory for all firms regardless of size, and limited to one or two approved providers. I created a concern which has been promised seed capital and I’d happily consign it to trustees and run as a charity. I already have buy-in on that score. In principle, the concerns revolve around indemnity and cost. Indemnity stays with the adviser. After all, it’s the advice which is being insured against. The file check exists to ensure that all the paperwork is there, and to confirm understanding with the client, directly, that the cost is ‘x’, and that the client knows what they are getting. The file check wouldn’t focus on the specifics. The file checker wouldn’t suck in through teeth and say “Well, I wouldn’t choose *that* fund.. best I tell ‘em”. That remains the responsibility of the adviser.
The file checker would, though, note if an unusual share class was being used, if the fund was inconsistent with the client’s circumstances, whether it was lurid (so, why?), whether the full costs and the impacts of those higher costs had been properly and fully disclosed, whether the client’s objectives had been identified, analysed and discussed, whether decent cash flow had taken place (etc), whether risk was discussed and suitable (etc etc). The checker would cross reference illustrations, research and process. Therefore, when the client gets a simple three or four page report, it won’t say whether or not there was agreement with the adviser, but it would say that process had been followed.
There is nothing to say that a client is ever guaranteed to anything other than a sub-optimal outcome, but a client should be best placed to make a well informed decision. Currently, however much we huff and puff, we know we are let down by a tiny minority of advisers and providers. Hopefully, as a rising tide raises all ships, the bad ones will sink. They’ll sink because they won’t carry out business because they know their crap work won’t stand scrutiny, and poor providers who act as poodles will stop using poor solutions in conjunction with poor (supposed) solution providers.
The budget is higher than I may have implied. I have budgeted for 64,000 files pa being checked by checkers earning a salaried £30,000. There would also be a pre-screening triage process which will arm potential transferees with the facts, an idea of sensible costs, and the questions to ask (actives or passives, do I need an ongoing service etc). I anticipate this being a short term ‘surge’ measure until DB schemes in payment become more prominent, transferee who are inclined to do so have done so, or values fall to a point that it’s no longer an issue. Let’s face it, this is costing tens of millions, and thousands of retirements are being ruined. We can no longer hide our heads in the sand. I have buy-in, *in principle*, from pretty much everyone who I need to push this forward.
Hence, the need (now) for real world potential client feedback from PHers who may be considering transferring, or who have.
Thank you.
It’s an external audit+.
There has to be agreement that the process has failed - not because it’s inherently bad, but because (like any process) it’s only as strong as its weakest link. We are cutting off an hand to save an arm. We are saying,this is going to make life difficult, but it’s going to save money for us and the client, will restore confidence in the system, and raise standards all round. After all, why would a corrupt adviser use a favoured poodle provider if he/she knew that the file would have to be validated anyway, by a third party?
The process would be external, mandatory for all firms regardless of size, and limited to one or two approved providers. I created a concern which has been promised seed capital and I’d happily consign it to trustees and run as a charity. I already have buy-in on that score. In principle, the concerns revolve around indemnity and cost. Indemnity stays with the adviser. After all, it’s the advice which is being insured against. The file check exists to ensure that all the paperwork is there, and to confirm understanding with the client, directly, that the cost is ‘x’, and that the client knows what they are getting. The file check wouldn’t focus on the specifics. The file checker wouldn’t suck in through teeth and say “Well, I wouldn’t choose *that* fund.. best I tell ‘em”. That remains the responsibility of the adviser.
The file checker would, though, note if an unusual share class was being used, if the fund was inconsistent with the client’s circumstances, whether it was lurid (so, why?), whether the full costs and the impacts of those higher costs had been properly and fully disclosed, whether the client’s objectives had been identified, analysed and discussed, whether decent cash flow had taken place (etc), whether risk was discussed and suitable (etc etc). The checker would cross reference illustrations, research and process. Therefore, when the client gets a simple three or four page report, it won’t say whether or not there was agreement with the adviser, but it would say that process had been followed.
There is nothing to say that a client is ever guaranteed to anything other than a sub-optimal outcome, but a client should be best placed to make a well informed decision. Currently, however much we huff and puff, we know we are let down by a tiny minority of advisers and providers. Hopefully, as a rising tide raises all ships, the bad ones will sink. They’ll sink because they won’t carry out business because they know their crap work won’t stand scrutiny, and poor providers who act as poodles will stop using poor solutions in conjunction with poor (supposed) solution providers.
The budget is higher than I may have implied. I have budgeted for 64,000 files pa being checked by checkers earning a salaried £30,000. There would also be a pre-screening triage process which will arm potential transferees with the facts, an idea of sensible costs, and the questions to ask (actives or passives, do I need an ongoing service etc). I anticipate this being a short term ‘surge’ measure until DB schemes in payment become more prominent, transferee who are inclined to do so have done so, or values fall to a point that it’s no longer an issue. Let’s face it, this is costing tens of millions, and thousands of retirements are being ruined. We can no longer hide our heads in the sand. I have buy-in, *in principle*, from pretty much everyone who I need to push this forward.
Hence, the need (now) for real world potential client feedback from PHers who may be considering transferring, or who have.
sidicks said:
I think the concept is sound, but will lead to higher costs and potentially extended timescales for these transfers, adversely impacting the members that you are trying to protect.
Would this be compulsory for all IFAs involved with DB schemes?
What happens to IFAs if their reports ‘fail’ the scrutiny of the review?
As stongle has outlined, I’m sceptical about the charge quoted - these proposals are likely to lead to additional work for the IFA involved, which they would probably need to charge the client for and £150 doesn’t feel like very much for an experienced advisor to provide a credible review of the paperwork etc, as well as associated admin costs.
Agreed, service delivery is an issue. It might be that the delay has to be sucked up for the minority, in order to secure greater safety for the many. If there are extenuating circumstances for a time critical application, that could be catered for. It’s not about business denial, it’s about bad business denial.Would this be compulsory for all IFAs involved with DB schemes?
What happens to IFAs if their reports ‘fail’ the scrutiny of the review?
As stongle has outlined, I’m sceptical about the charge quoted - these proposals are likely to lead to additional work for the IFA involved, which they would probably need to charge the client for and £150 doesn’t feel like very much for an experienced advisor to provide a credible review of the paperwork etc, as well as associated admin costs.
Edited by sidicks on Thursday 23 August 11:59
The client and/or trustee would approach the IFA and simply say, ‘Currently, in accordance with COBS 133.4 (eg, etc) this application suitability remains unclear, please address the following points before we proceed’.
The adviser wouldn’t incur any costs directly. If anything, levies to FSCS etc would fall. If government was to fund the whole thing, it would still save money, but would be likely to have to concede existing arrangements on its watch have failed. Not good for any politician. As it is, I think g’ment, sector, trustee and member will subsidise. If pressed, I’d say trustee and member would carry the majority of the burden. Hence, £150 per transfer application.
On a 750k transfer with a stranger, it’s a form logical of sense-check second opinion. On a £30,001 transfer into Aviva managed boggo funds from an adviser you’ve known and trusted for twenty years, it’s more of a pain I concede. Hence, cut off a hand to save an arm.
As mentioned in another post, this peer review (by a suitably qualified and experienced individual) should be carried out within the firm providing the advice, and should be built into the IFA regulatory framework - I'm very surprised it isn't. This might be expected to increase cost if it isn't carried out already, and I would expect these costs to be covered within the IFA charges rather than as an explicit extra, in addition to the cost for advice. The buck stops at the firm providing the advice, rather than the auditor, the auditor's auditor, and so on...
An external independent review is belt-and-braces which shouldn't be automatically required - we need to assume a certain level of competence in the individuals in the firm providing the advice, and have confidence in the framework in which this advice is provided. The regulatory framework should include specific requirements for peer review - including the qualifications and experience required to undertake it, the circumstances under which it is required, and expectations thereof.
An external independent review is belt-and-braces which shouldn't be automatically required - we need to assume a certain level of competence in the individuals in the firm providing the advice, and have confidence in the framework in which this advice is provided. The regulatory framework should include specific requirements for peer review - including the qualifications and experience required to undertake it, the circumstances under which it is required, and expectations thereof.
number2 said:
As mentioned in another post, this peer review (by a suitably qualified and experienced individual) should be carried out within the firm providing the advice, and should be built into the IFA regulatory framework - I'm very surprised it isn't. This might be expected to increase cost if it isn't carried out already, and I would expect these costs to be covered within the IFA charges rather than as an explicit extra, in addition to the cost for advice. The buck stops at the firm providing the advice, rather than the auditor, the auditor's auditor, and so on...
An external independent review is belt-and-braces which shouldn't be automatically required - we need to assume a certain level of competence in the individuals in the firm providing the advice, and have confidence in the framework in which this advice is provided. The regulatory framework should include specific requirements for peer review - including the qualifications and experience required to undertake it, the circumstances under which it is required, and expectations thereof.
A two man principle of sorts is being considered. The buck might stop at the advice, but the impact of bad practice doesn’t. All good firms pay for bad practice of others, it costs many millions more than this would cost.An external independent review is belt-and-braces which shouldn't be automatically required - we need to assume a certain level of competence in the individuals in the firm providing the advice, and have confidence in the framework in which this advice is provided. The regulatory framework should include specific requirements for peer review - including the qualifications and experience required to undertake it, the circumstances under which it is required, and expectations thereof.
Should it happen? No, of course not. Do we have, generally, a very good system? Yes, I think we do. Are we all let down disproportionately by a few bad players? Yes, absolutely. It doesn’t matter about ‘shoulds’ or ‘shouldn’ts’ anymore. What matters if recognising that it happens and has to be stopped. If that means something bold and decisive, so be it.
Good advisers won’t mind. It’s annoying, sure, but good advisers want to stamp out carcinogenic practice. If that means there’s a measure of encumberence in the short term, so be it.
Ginge R said:
Both,
Thank you.
It’s an external audit+.
There has to be agreement that the process has failed - not because it’s inherently bad, but because (like any process) it’s only as strong as its weakest link. We are cutting off an hand to save an arm. We are saying,this is going to make life difficult, but it’s going to save money for us and the client, will restore confidence in the system, and raise standards all round. After all, why would a corrupt adviser use a favoured poodle provider if he/she knew that the file would have to be validated anyway, by a third party?
The process would be external, mandatory for all firms regardless of size, and limited to one or two approved providers. I created a concern which has been promised seed capital and I’d happily consign it to trustees and run as a charity. I already have buy-in on that score. In principle, the concerns revolve around indemnity and cost. Indemnity stays with the adviser. After all, it’s the advice which is being insured against. The file check exists to ensure that all the paperwork is there, and to confirm understanding with the client, directly, that the cost is ‘x’, and that the client knows what they are getting. The file check wouldn’t focus on the specifics. The file checker wouldn’t suck in through teeth and say “Well, I wouldn’t choose *that* fund.. best I tell ‘em”. That remains the responsibility of the adviser.
The file checker would, though, note if an unusual share class was being used, if the fund was inconsistent with the client’s circumstances, whether it was lurid (so, why?), whether the full costs and the impacts of those higher costs had been properly and fully disclosed, whether the client’s objectives had been identified, analysed and discussed, whether decent cash flow had taken place (etc), whether risk was discussed and suitable (etc etc). The checker would cross reference illustrations, research and process. Therefore, when the client gets a simple three or four page report, it won’t say whether or not there was agreement with the adviser, but it would say that process had been followed.
There is nothing to say that a client is ever guaranteed to anything other than a sub-optimal outcome, but a client should be best placed to make a well informed decision. Currently, however much we huff and puff, we know we are let down by a tiny minority of advisers and providers. Hopefully, as a rising tide raises all ships, the bad ones will sink. They’ll sink because they won’t carry out business because they know their crap work won’t stand scrutiny, and poor providers who act as poodles will stop using poor solutions in conjunction with poor (supposed) solution providers.
The budget is higher than I may have implied. I have budgeted for 64,000 files pa being checked by checkers earning a salaried £30,000. There would also be a pre-screening triage process which will arm potential transferees with the facts, an idea of sensible costs, and the questions to ask (actives or passives, do I need an ongoing service etc). I anticipate this being a short term ‘surge’ measure until DB schemes in payment become more prominent, transferee who are inclined to do so have done so, or values fall to a point that it’s no longer an issue. Let’s face it, this is costing tens of millions, and thousands of retirements are being ruined. We can no longer hide our heads in the sand. I have buy-in, *in principle*, from pretty much everyone who I need to push this forward.
Hence, the need (now) for real world potential client feedback from PHers who may be considering transferring, or who have.
I can see the value add here, so wish you every success in getting this off the ground.Thank you.
It’s an external audit+.
There has to be agreement that the process has failed - not because it’s inherently bad, but because (like any process) it’s only as strong as its weakest link. We are cutting off an hand to save an arm. We are saying,this is going to make life difficult, but it’s going to save money for us and the client, will restore confidence in the system, and raise standards all round. After all, why would a corrupt adviser use a favoured poodle provider if he/she knew that the file would have to be validated anyway, by a third party?
The process would be external, mandatory for all firms regardless of size, and limited to one or two approved providers. I created a concern which has been promised seed capital and I’d happily consign it to trustees and run as a charity. I already have buy-in on that score. In principle, the concerns revolve around indemnity and cost. Indemnity stays with the adviser. After all, it’s the advice which is being insured against. The file check exists to ensure that all the paperwork is there, and to confirm understanding with the client, directly, that the cost is ‘x’, and that the client knows what they are getting. The file check wouldn’t focus on the specifics. The file checker wouldn’t suck in through teeth and say “Well, I wouldn’t choose *that* fund.. best I tell ‘em”. That remains the responsibility of the adviser.
The file checker would, though, note if an unusual share class was being used, if the fund was inconsistent with the client’s circumstances, whether it was lurid (so, why?), whether the full costs and the impacts of those higher costs had been properly and fully disclosed, whether the client’s objectives had been identified, analysed and discussed, whether decent cash flow had taken place (etc), whether risk was discussed and suitable (etc etc). The checker would cross reference illustrations, research and process. Therefore, when the client gets a simple three or four page report, it won’t say whether or not there was agreement with the adviser, but it would say that process had been followed.
There is nothing to say that a client is ever guaranteed to anything other than a sub-optimal outcome, but a client should be best placed to make a well informed decision. Currently, however much we huff and puff, we know we are let down by a tiny minority of advisers and providers. Hopefully, as a rising tide raises all ships, the bad ones will sink. They’ll sink because they won’t carry out business because they know their crap work won’t stand scrutiny, and poor providers who act as poodles will stop using poor solutions in conjunction with poor (supposed) solution providers.
The budget is higher than I may have implied. I have budgeted for 64,000 files pa being checked by checkers earning a salaried £30,000. There would also be a pre-screening triage process which will arm potential transferees with the facts, an idea of sensible costs, and the questions to ask (actives or passives, do I need an ongoing service etc). I anticipate this being a short term ‘surge’ measure until DB schemes in payment become more prominent, transferee who are inclined to do so have done so, or values fall to a point that it’s no longer an issue. Let’s face it, this is costing tens of millions, and thousands of retirements are being ruined. We can no longer hide our heads in the sand. I have buy-in, *in principle*, from pretty much everyone who I need to push this forward.
Hence, the need (now) for real world potential client feedback from PHers who may be considering transferring, or who have.
Won’t you need regulatory buy-in, how far has this been progressed?
Thank you. 
I’m not telling tales out of school, but Head of tPR is personally aware, and it is now in the early stages of internal staffing. She is very proactive, I spent Monday and Tuesday in South Wales with two of her senior members of staff, discussing the BSPS debacle. Anecdotally, they think the idea has great merit. I meet with senior tPR again in a couple of weeks. Hence, real world feedback from PH now required.
Response from across the sector echelon has also been very supportive so far. I can see one or two issues arising as traction is established and some minor points become more prominent and thorny, but by then, I hope to establish a sense of momentum and an acceptance of not only an irresistible need for change, but the means here to do it.
I’m not telling tales out of school, but Head of tPR is personally aware, and it is now in the early stages of internal staffing. She is very proactive, I spent Monday and Tuesday in South Wales with two of her senior members of staff, discussing the BSPS debacle. Anecdotally, they think the idea has great merit. I meet with senior tPR again in a couple of weeks. Hence, real world feedback from PH now required.
Response from across the sector echelon has also been very supportive so far. I can see one or two issues arising as traction is established and some minor points become more prominent and thorny, but by then, I hope to establish a sense of momentum and an acceptance of not only an irresistible need for change, but the means here to do it.
Al, what you are basically saying is that all regulated financial advisers (such as yourself) cannot and should not be trusted with pension transfers and a big boy who knows what he is doing needs to sign off their/your file to make sure they/you got it right.
Brutally honest, I have to admit. But not a very clever or positive step forward in delivering a message of professionalism.
Ironically, the FCA seems to share your thoughts as they want providers to do just this before accepting business from advisers.
This would further undermine adviser credibility (as your project is already doing), though in all fairness it is a far more sensible route as unlike with your solution (which I think is unworkable as a third party 'auditor' cannot give a green light without accepting full responsibility and liability for this) the FCA do stipulate that they will hold the providers liable for the adviser's advice.
This is only going to lead back to the providers controlling the advisers and a complete loss of any semblance of independence.
Constructive thoughts:
I am trying to be constructive above. Rather than discredit an entire sector surely a more cost effective, realistic and workable option would be to lobby for compulsory insurance advice (rather than the current PI regime) that insures each client for 100% of any loss that arises from the regulated advice they have been provided with.
This would remove the need for the current PI cover and the adviser contributions to the FSCS, so be far lower cost for advisers (if indeed it created a cost at all with the removal of traditional PI and FSCS levies), cost nothing to clients and give complete and utter faith in the financial advice sector, rather than destroy it.
Equally, those firms that do not have claims made against them will benefit from lower premiums and those firms that do will have to cover their increased premiums themselves, rather than the good apples paying for the bad ones.
Just a thought...
Editied for typos
Brutally honest, I have to admit. But not a very clever or positive step forward in delivering a message of professionalism.
Ironically, the FCA seems to share your thoughts as they want providers to do just this before accepting business from advisers.
This would further undermine adviser credibility (as your project is already doing), though in all fairness it is a far more sensible route as unlike with your solution (which I think is unworkable as a third party 'auditor' cannot give a green light without accepting full responsibility and liability for this) the FCA do stipulate that they will hold the providers liable for the adviser's advice.
This is only going to lead back to the providers controlling the advisers and a complete loss of any semblance of independence.
Constructive thoughts:
- How are your 'auditors' going to escape liability for their 'audit'?
- If they have no responsibility or liability for their decisions then how will you persuade people that they are worth paying for?
- What qualifications would they need to have? I presume G60, so in that case your 'auditors' will all qualified financial advisers (the same people you are saying cannot be trusted!).
- Who will regulate them?
- What sort of PI insurance will be needed/required?
- Your figures don't stack up. Assuming you are absorbing the 20% VAT (as you state it would cost £150 per client) which in itself is just shy of £2m a year on 64,000 cases and if your general overheads (rent, rates, utilities, professional fees, telephone/stationary/postage costs, employers NI, insurance, line manager costs, etc.) only used up another 30% of revenue you would be left with enough money to pay 160 auditors £30k a year before you went broke. Given part of the process would have to be reviewing all documentation and confirming with the client that the representations given in each document were indeed accurate (and assuming a 7 hour, 5 day working week with holidays, bank holidays and sickness time) this would require 2 files started and completed every single working day by every single 'auditor'. Do you think this is feasible?
- If a complete review and audit for each client is feasible for £150, then why is the original pension switching advice not feasible for a similar sum?
- How are you going to recruit suitability qualified (G60?) people for £30k a year?
- How many pension transfer complaints relating to FCA authorised and regulated advisers are actually upheld every year to justify this cost and dramatic move in policy?
- If financial advisers cannot be trusted with pension transfer advice, then surely they cannot be trusted with any advice. With c. 20,000 regulated advisers and let's just say one piece of advice a day per adviser (same working day mechanics as above) then this would be 4.6m reviews/audits required every single year. Is that workable and cost effective (with 20,000 reviews/audits a day) at a cost of over 2/3rds of a billion a year?
I am trying to be constructive above. Rather than discredit an entire sector surely a more cost effective, realistic and workable option would be to lobby for compulsory insurance advice (rather than the current PI regime) that insures each client for 100% of any loss that arises from the regulated advice they have been provided with.
This would remove the need for the current PI cover and the adviser contributions to the FSCS, so be far lower cost for advisers (if indeed it created a cost at all with the removal of traditional PI and FSCS levies), cost nothing to clients and give complete and utter faith in the financial advice sector, rather than destroy it.
Equally, those firms that do not have claims made against them will benefit from lower premiums and those firms that do will have to cover their increased premiums themselves, rather than the good apples paying for the bad ones.
Just a thought...
Editied for typos
Edited by JulianPH on Thursday 23 August 21:39
I don't consider myself an expert but I take an interest and have some level of understanding in lay person terms. I have a SIPP, employer DC scheme and am a deferred member if a DB scheme and am actively looking at retirement planning in my mid 40's.
If this is an independent check that my advisor is acting in my best interests and doing the right things great but for £150 I doubt it is!
If its a box ticking exercise then I don't see it adding value. Professionally, I've seen audits and box ticking exercises where the box gets ticked but the item that enabled the box to be ticked was of such poor quality it was meaningless. Again £150 suggests full quality assessment isn't possible but I may be wrong.
Maybe if it is checking that what my advisor provides is suitable for a lay person to understand and all bases are covered / it gives me something to scrutinise my advisor against it may add some value. I guess there may be an element of the analysis that isn't up to scratch and I may not even know thats what they should be looking at. But isn't that what the regs are for?
Hope that helps!
If this is an independent check that my advisor is acting in my best interests and doing the right things great but for £150 I doubt it is!
If its a box ticking exercise then I don't see it adding value. Professionally, I've seen audits and box ticking exercises where the box gets ticked but the item that enabled the box to be ticked was of such poor quality it was meaningless. Again £150 suggests full quality assessment isn't possible but I may be wrong.
Maybe if it is checking that what my advisor provides is suitable for a lay person to understand and all bases are covered / it gives me something to scrutinise my advisor against it may add some value. I guess there may be an element of the analysis that isn't up to scratch and I may not even know thats what they should be looking at. But isn't that what the regs are for?
Hope that helps!
goingonholiday said:
I don't consider myself an expert but I take an interest and have some level of understanding in lay person terms. I have a SIPP, employer DC scheme and am a deferred member if a DB scheme and am actively looking at retirement planning in my mid 40's.
If this is an independent check that my advisor is acting in my best interests and doing the right things great but for £150 I doubt it is!
If its a box ticking exercise then I don't see it adding value. Professionally, I've seen audits and box ticking exercises where the box gets ticked but the item that enabled the box to be ticked was of such poor quality it was meaningless. Again £150 suggests full quality assessment isn't possible but I may be wrong.
Maybe if it is checking that what my advisor provides is suitable for a lay person to understand and all bases are covered / it gives me something to scrutinise my advisor against it may add some value. I guess there may be an element of the analysis that isn't up to scratch and I may not even know thats what they should be looking at. But isn't that what the regs are for?
Hope that helps!
This echo's some of my thoughts above.If this is an independent check that my advisor is acting in my best interests and doing the right things great but for £150 I doubt it is!
If its a box ticking exercise then I don't see it adding value. Professionally, I've seen audits and box ticking exercises where the box gets ticked but the item that enabled the box to be ticked was of such poor quality it was meaningless. Again £150 suggests full quality assessment isn't possible but I may be wrong.
Maybe if it is checking that what my advisor provides is suitable for a lay person to understand and all bases are covered / it gives me something to scrutinise my advisor against it may add some value. I guess there may be an element of the analysis that isn't up to scratch and I may not even know thats what they should be looking at. But isn't that what the regs are for?
Hope that helps!
On a £750,000 transfer (to use your figure above Al) the advice cost is likely to be £22,500 (for the typical 3% initial fee) and £7,500 a year thereafter (for the typical 1% annual fee).
So a fee of £150 to 'audit' this advice is either ridiculously low, or the advice fee is ridiculously high (and this is what my money is on).
So there is no perceived public value in this service on this basis.
However (and crucially), if there is no liability or responsibility arising from the 'audit' then, whatever the fee, it adds no value whatsoever in the eyes of the public.
As goingonholiday said, in any event, isn't that what the regs are for? I think you will find most people will agree with this and your proposal will undermine a system that works, with the obvious exception of those set out to scam and defraud.
These rogues are extremely good at hiding what they are doing and are learning new techniques faster than you imagine, so your green light could easily backfire. As you know, we have very high levels of systems and controls, but that didn't stop us getting caught out - they have become highly sophisticated.
Yes, your proposal may (or may not) stop the rare (and they are rare in the grand scheme of things) cases of advice fraud. However, this will be at a great cost to public trust in regulated financial advisers.
After all, if you can't trust the regulated ones then why pay for them in the first place.
If I went to a solicitor who told me I could not rely upon his advice without someone else checking it out then I simply would not use him at all. Why would anyone think anything otherwise if a financial adviser had to tell them the same thing?
I do applaud your sentiments here, but setting out to undermine all regulated advisers due to the actions of a very small number of scam artists does seem akin to taking a sledgehammer to crack a walnut.
If you believe that your proposal has legs then why not try it out yourself. You have FCA authorisation through the Whitechurch network and so could set up a company called "Second Financial Opinion" (as a crude naming example) that offered this service. That would gauge the demand.
But be aware your statement "Indemnity stays with the adviser. After all, it’s the advice which is being insured against" is not legally correct:
Firstly, isn't the advice already insured against by the adviser, or are you suggesting it is not and that you are insuring against it. Which is it?
Secondly, if you give the green light then liability really does transfer to you. Every time.
Sorry to ramble, I hope that is constructive.
A lot of things are made more difficult, complex and/or expensive than they ought to be because the regulator doesn't regulated as it should.
Advisors are already duty bound to act in their clients' best interests (as opposed to their own).
I find it staggering that on one hand the advice market is being attacked by the FCA as untrustworthy over DB transfers, yet on the other the regulator is going to insist firms self-cert their CF30s rather than have them vetted by the FCA as they are now.
The rules for all these things exist now, the issue is that the FCA want to offload cost and risk to the advice market.
Putting another mouth to feed into the transfer chain will add cost to the process, cost that is ultimately going to be borne by the consumer. My view is that this is poor value for the consumer, as the current rules, if enforced effectively, should protect them.
Advisors are already duty bound to act in their clients' best interests (as opposed to their own).
I find it staggering that on one hand the advice market is being attacked by the FCA as untrustworthy over DB transfers, yet on the other the regulator is going to insist firms self-cert their CF30s rather than have them vetted by the FCA as they are now.
The rules for all these things exist now, the issue is that the FCA want to offload cost and risk to the advice market.
Putting another mouth to feed into the transfer chain will add cost to the process, cost that is ultimately going to be borne by the consumer. My view is that this is poor value for the consumer, as the current rules, if enforced effectively, should protect them.
Edited by janesmith1950 on Friday 24th August 17:39
janesmith1950 said:
A lot of things are made more difficult, complex and/or expensive than they ought to be because the regulator doesn't regulated as it should.
Advisors are already duty bound to act in their clients' best interests (as opposed to their own).
I find it staggering that on one hand the advice market is being attacked by the FCA as untrustworthy over DB transfers, yet on the other the regulator is going to insist firms self-cert their CF30s rather than have them vetted by the FCA as they are now.
The rules for all these things exist now, the issue is that the FCA want to offload cost and risk to the advice market.
Putting another mouth to feed into the transfer chain will add cost to the process, cost that is ultimately going to be borne by the consumer. My view is that this is poor value for the consumer, as the current rules, if enforced effectively, should protect them.
That’s a great soundbite. Let’s cut the sector bullsAdvisors are already duty bound to act in their clients' best interests (as opposed to their own).
I find it staggering that on one hand the advice market is being attacked by the FCA as untrustworthy over DB transfers, yet on the other the regulator is going to insist firms self-cert their CF30s rather than have them vetted by the FCA as they are now.
The rules for all these things exist now, the issue is that the FCA want to offload cost and risk to the advice market.
Putting another mouth to feed into the transfer chain will add cost to the process, cost that is ultimately going to be borne by the consumer. My view is that this is poor value for the consumer, as the current rules, if enforced effectively, should protect them.
Edited by janesmith1950 on Friday 24th August 17:39
t. The individual alleged to have been instrumental in the miss-selling that I am involved with, was allowed to practice at will through lead generation. Yet, he was known to the people he had previously transacted with, and they continued to transact his business. He’s not alone. Reality is, Jane, clients and advisers already pay. We pay though increased levies which are passed down to customers.
If you work for one of the large vertically integrated firms who do the work internally, then this happens already pre-advice.
The advice is checked off (by a fully qualified individual in their own right), pre-sale, a process that is lengthy and costly.
If you had to put a price on it, it would be way over £150 in time alone.
You would be amazed how some of the advice is pulled apart, despite Chartered adviser + Chartered specialist para-planning, ceding scheme information tested and even the TVAS gets taken apart.
The outcome is bullet-proof advice backed by a report (Suitability Letter) that is utterly bomb-proof, but it comes at a cost, a large cost.
There is also huge risk aversion, as no-one really wants the risk of doing this work at the moment.
The advice is checked off (by a fully qualified individual in their own right), pre-sale, a process that is lengthy and costly.
If you had to put a price on it, it would be way over £150 in time alone.
You would be amazed how some of the advice is pulled apart, despite Chartered adviser + Chartered specialist para-planning, ceding scheme information tested and even the TVAS gets taken apart.
The outcome is bullet-proof advice backed by a report (Suitability Letter) that is utterly bomb-proof, but it comes at a cost, a large cost.
There is also huge risk aversion, as no-one really wants the risk of doing this work at the moment.
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