Discussion
An interesting letter today, to pension providers, from the Regulator about various concerns relating to pension transfers.
https://www.fca.org.uk/publication/correspondence/...
https://www.fca.org.uk/publication/correspondence/...
It is incredible the lengths the FCA are now taking to protect people from Independent Financial Advisor's terrible advice with regard to SIPPs.
I am very relieved that IM has never worked with unregulated introducer's and only ever allowed FCA defined "Standard Assets" through FCA authorised firms..
Obviously the FCA seem to be changing the goalposts, and that would be terrible news for every IFA, but I am confident that most have already filled their boots (with great big pile's of client fees) in any case.
In today's world it takes great courage to admit you are part of the big problem. I salute you for that alone.
I am very relieved that IM has never worked with unregulated introducer's and only ever allowed FCA defined "Standard Assets" through FCA authorised firms..
Obviously the FCA seem to be changing the goalposts, and that would be terrible news for every IFA, but I am confident that most have already filled their boots (with great big pile's of client fees) in any case.
In today's world it takes great courage to admit you are part of the big problem. I salute you for that alone.
I wonder when we're going to see a Court of Appeal case that opens the floodgates?
DB transfers are a massive and expanding s
t balloon and when it goes pop, so will a lot of advisors and advice firms.
It's not necessarily that all the advice to transfer out has been bad, it's that regulation and insurance has driven against what in many cases, consumers want.
There is an odd conflict of interest in DB transfers. On one hand, the advisor is legally bound to advise on the whatever is going to give the best financial result based on the client's circumstances and future plans. On the other, the consumer may want to do something with their money that is inconsistent with the advisor's opinion. The DB trustees (and receiving fund) typically won't accept the transfer unless an advisor has advised (and sometimes that the advice must be in the positive).
This lacuna means people effectively cannot control money, that they have saved and belongs to them.
It is perverse that people are not allowed to control their own savings, even if that means sometimes they may make foolish decisions.
The solution is to create a solid, repeatable, industry-wide process that allows an advisor to provide Advice to an insistent client, advising that the client's proposed course of action is not in their best financial interests. The client is then free to either take or ignore this advice and the DB Trusts and Providers are obliged to allow the client to transfer.
Part two is to create a long stop, say 10 to 15 years, on advisor's risk of being held liable for their advice. This would have the effect of reducing insurance premiums for advisors, allowing advice to be provided, at reasonable cost, in this contentious area.
The current situation is akin to someone taking legal advice, not liking that advice, and being prevented from taking their own, alternative actions by the court, as they hadn't got a sign-off from a lawyer supporting them.
In my opinion people should be free to make their own decisions and live by them, albeit with affordable and practical access to professional advice where desirable.
DB transfers are a massive and expanding s
t balloon and when it goes pop, so will a lot of advisors and advice firms. It's not necessarily that all the advice to transfer out has been bad, it's that regulation and insurance has driven against what in many cases, consumers want.
There is an odd conflict of interest in DB transfers. On one hand, the advisor is legally bound to advise on the whatever is going to give the best financial result based on the client's circumstances and future plans. On the other, the consumer may want to do something with their money that is inconsistent with the advisor's opinion. The DB trustees (and receiving fund) typically won't accept the transfer unless an advisor has advised (and sometimes that the advice must be in the positive).
This lacuna means people effectively cannot control money, that they have saved and belongs to them.
It is perverse that people are not allowed to control their own savings, even if that means sometimes they may make foolish decisions.
The solution is to create a solid, repeatable, industry-wide process that allows an advisor to provide Advice to an insistent client, advising that the client's proposed course of action is not in their best financial interests. The client is then free to either take or ignore this advice and the DB Trusts and Providers are obliged to allow the client to transfer.
Part two is to create a long stop, say 10 to 15 years, on advisor's risk of being held liable for their advice. This would have the effect of reducing insurance premiums for advisors, allowing advice to be provided, at reasonable cost, in this contentious area.
The current situation is akin to someone taking legal advice, not liking that advice, and being prevented from taking their own, alternative actions by the court, as they hadn't got a sign-off from a lawyer supporting them.
In my opinion people should be free to make their own decisions and live by them, albeit with affordable and practical access to professional advice where desirable.
bhstewie said:
hstewie said: What's that saying in plain english?
In plain English the FCA is saying after spending a year conducting a review on financial advisers pension transfer advice (where over half of all recommendations were found to be unsuitable, not appropriate or lacking) they have given up and want the providers to police this activity for them.A killer line is this:
The FCA said:
We expect you to have appropriate measures in place to ensure that products are being recommended responsibly and appropriately, in accordance with the Treating Customers Fairly Principle.
This effectively makes providers responsible for the pension transfer advice given by third party IFAs. The ramifications could be huge:
Firstly, the media will get hold of this an highlight how the FCA itself is sending out a clear message the IFAs cannot be trusted. This will impact the good advisers as well as the bad ones.
Secondly, providers will no longer accept pension transfers from advisers due to the potential liability generated. This will mean that people in Final Salary schemes will find it impossible to move out using an IFA (as advice is a requirement).
Thirdly, it is illogical that this principle, once established as it now appears to be, will remain restricted to pension transfers and therefore it will extend to all types of advised business. This means that providers will cease accepting business from IFAs altogether meaning an end to IFAs (if they have no providers to recommend their business model is dead in the water.
This will result in the rise of restricted advisers working directly for providers and the growth in models such as SJP.
janesmith1950 said:
In my opinion people should be free to make their own decisions and live by them, albeit with affordable and practical access to professional advice where desirable.
Apologies for editing your post, but it's this last bit that struck a chord with me. Context: my wife has a small FS pension which would pay her around £1600 p.a. starting in 12 years time. In other words, peanuts, even if guaranteed. The transfer value today is £75k. In other words, worth having, even if the money would then be at modest risk in her personal pension.Now, we cannot get an adviser to touch it - it's too small, e.g. players like Tideway aren't interested below £400k.
I'm a Chartered Accountant, I know what I'm doing (he says modestly), and yet we can't access our own money. Why can't we just sign a disclaimer and get the transfer value? If it was a DC pension pot we could do what the hell we like with it, yet we're not to be trusted with a DB pension.
Brave Fart said:
janesmith1950 said:
In my opinion people should be free to make their own decisions and live by them, albeit with affordable and practical access to professional advice where desirable.
Apologies for editing your post, but it's this last bit that struck a chord with me. Context: my wife has a small FS pension which would pay her around £1600 p.a. starting in 12 years time. In other words, peanuts, even if guaranteed. The transfer value today is £75k. In other words, worth having, even if the money would then be at modest risk in her personal pension.Now, we cannot get an adviser to touch it - it's too small, e.g. players like Tideway aren't interested below £400k.
I'm a Chartered Accountant, I know what I'm doing (he says modestly), and yet we can't access our own money. Why can't we just sign a disclaimer and get the transfer value? If it was a DC pension pot we could do what the hell we like with it, yet we're not to be trusted with a DB pension.
It is ridiculous that people cannot make financial decisions without paying for someone to give advice (if you don't want/need it).
Equally, such advice is rather prudent in most cases.
The problem is that there are so many scam merchants out there (FCA regulated or not) that the whole concept of financial advice has been devalued to the point where few people are prepared to pay anything for it. This is sad for the good advisers out there.
Regulation has been lapse, to say the least, over the last decade. The regulator is now blaming the people and firms it was supposed to regulate over this time.
I should set up a pension transfer firm that simply says no to every case, after charging a flat £1,000 for this hearty advice. This would mean people like yourself have received the required advice and gone against it - as is your right after having received such advice!!!
Of course, I would still be open to any claim if the advice to remain was incorrect. You basically can't win, but this approach seems considerably safer!
What's really frightening right now and over the past 2 years, is the large number of small-time advice firms, whose principle is close to retirement age and have been filling their boots with DB transfers of all flavours.
Many of these people have been putting pretty much anything through, knowing that eventually the PII renewal and the FCA will catch up with them, however by that time they'll have had 3 or 4 years of earning £250k+ before folding the LTD co and waving goodbye to the industry. The poor punters who lose out will be left to the Ombudsman and the statutory maximum payouts and the rest of the industry will be left to pick up the tab.
It's absolutely RIFE and a disgrace on the regulator.
Many of these people have been putting pretty much anything through, knowing that eventually the PII renewal and the FCA will catch up with them, however by that time they'll have had 3 or 4 years of earning £250k+ before folding the LTD co and waving goodbye to the industry. The poor punters who lose out will be left to the Ombudsman and the statutory maximum payouts and the rest of the industry will be left to pick up the tab.
It's absolutely RIFE and a disgrace on the regulator.
JulianPH said:
Brave Fart said:
janesmith1950 said:
In my opinion people should be free to make their own decisions and live by them, albeit with affordable and practical access to professional advice where desirable.
Apologies for editing your post, but it's this last bit that struck a chord with me. Context: my wife has a small FS pension which would pay her around £1600 p.a. starting in 12 years time. In other words, peanuts, even if guaranteed. The transfer value today is £75k. In other words, worth having, even if the money would then be at modest risk in her personal pension.Now, we cannot get an adviser to touch it - it's too small, e.g. players like Tideway aren't interested below £400k.
I'm a Chartered Accountant, I know what I'm doing (he says modestly), and yet we can't access our own money. Why can't we just sign a disclaimer and get the transfer value? If it was a DC pension pot we could do what the hell we like with it, yet we're not to be trusted with a DB pension.
It is ridiculous that people cannot make financial decisions without paying for someone to give advice (if you don't want/need it).
Equally, such advice is rather prudent in most cases.
The problem is that there are so many scam merchants out there (FCA regulated or not) that the whole concept of financial advice has been devalued to the point where few people are prepared to pay anything for it. This is sad for the good advisers out there.
Regulation has been lapse, to say the least, over the last decade. The regulator is now blaming the people and firms it was supposed to regulate over this time.
I should set up a pension transfer firm that simply says no to every case, after charging a flat £1,000 for this hearty advice. This would mean people like yourself have received the required advice and gone against it - as is your right after having received such advice!!!
Of course, I would still be open to any claim if the advice to remain was incorrect. You basically can't win, but this approach seems considerably safer!
On the one hand the people who have earned this money should categorically have the freedom to do with it as they please.
But on the other hand we all know only two well that this amount of money in the total control of conventional British workers opens the doors wide open to organised crime. We know that thousands of people would be doorstepped by gangsters and lose everything.
In addition, we also know that statistically, humans tend to be absolutely terrible at handling lump sums sensibly and so we should ask if it is fair to expect the taxpayer to be picking up the burden of those who lose their pension because of personal mismanagement.
The solution probably lies somewhere in the middle. I feel it is right that recipients should be forced legally to obtain advice as we know so many recipients have so little understanding or experience of this level of financial decision. But maybe they should be free to hand write and sign in the presence of a suitable witness and in very large writing that they fully understand the advice that they have been given, that they reject it fully and want to do what they want to do with this money, that it has been clearly explained to them the relevance of FCA protected products and how high return rates are almost always a scam or at best totally unsuitable and fully accept that they will have zero recourse to anyone at any time including the taxpayer. They will receive no assistance or benefits related to this in any way shape or form.
What is really shocking about this letter from the FCA is that it is an overt admission that they have not been regulating their advisors for years and they don’t intend to going forward.
DonkeyApple said:
I don’t personally know which side of the fence to sit on with regards to this particular aspect.
On the one hand the people who have earned this money should categorically have the freedom to do with it as they please.
But on the other hand we all know only two well that this amount of money in the total control of conventional British workers opens the doors wide open to organised crime. We know that thousands of people would be doorstepped by gangsters and lose everything.
In addition, we also know that statistically, humans tend to be absolutely terrible at handling lump sums sensibly and so we should ask if it is fair to expect the taxpayer to be picking up the burden of those who lose their pension because of personal mismanagement.
The solution probably lies somewhere in the middle. I feel it is right that recipients should be forced legally to obtain advice as we know so many recipients have so little understanding or experience of this level of financial decision. But maybe they should be free to hand write and sign in the presence of a suitable witness and in very large writing that they fully understand the advice that they have been given, that they reject it fully and want to do what they want to do with this money, that it has been clearly explained to them the relevance of FCA protected products and how high return rates are almost always a scam or at best totally unsuitable and fully accept that they will have zero recourse to anyone at any time including the taxpayer. They will receive no assistance or benefits related to this in any way shape or form.
What is really shocking about this letter from the FCA is that it is an overt admission that they have not been regulating their advisors for years and they don’t intend to going forward.
Look at the pattern:On the one hand the people who have earned this money should categorically have the freedom to do with it as they please.
But on the other hand we all know only two well that this amount of money in the total control of conventional British workers opens the doors wide open to organised crime. We know that thousands of people would be doorstepped by gangsters and lose everything.
In addition, we also know that statistically, humans tend to be absolutely terrible at handling lump sums sensibly and so we should ask if it is fair to expect the taxpayer to be picking up the burden of those who lose their pension because of personal mismanagement.
The solution probably lies somewhere in the middle. I feel it is right that recipients should be forced legally to obtain advice as we know so many recipients have so little understanding or experience of this level of financial decision. But maybe they should be free to hand write and sign in the presence of a suitable witness and in very large writing that they fully understand the advice that they have been given, that they reject it fully and want to do what they want to do with this money, that it has been clearly explained to them the relevance of FCA protected products and how high return rates are almost always a scam or at best totally unsuitable and fully accept that they will have zero recourse to anyone at any time including the taxpayer. They will receive no assistance or benefits related to this in any way shape or form.
What is really shocking about this letter from the FCA is that it is an overt admission that they have not been regulating their advisors for years and they don’t intend to going forward.
- The government grants everyone pension freedoms.
- Those in DB schemes are legally forced to take advice from FCA authorised regulated financial advisers. This give a clear message that they can trust these individuals.
- FCA authorised and regulated financial advisers prove to be untrustworthy (by no means all of them, but half of the advice reviewed was found to be unsatisfactory).
- The FCA then issues a letter effectively telling people they cannot trust the advisers they have authorised and that they regulate, stating the providers need to effectively give the green light on the adviser's advice (doing the FCA's job for them).
- Providers promptly refuse to take on board any liability for unconnected adviser's advice and ban accepting such transfers.
- The people is DB schemes can no longer access pension freedoms, unless they use an adviser working for a particular provider, therefore limiting choice.
You really couldn't make it up.
You are exactly right in your last point too. This principle, now established, will quickly be extended to all financial advice and the concept of independence will go out of the window.
If this protects the public from bad advice it may be a price worth paying though...
bhstewie said:
hstewie said: Why are pensions viewed so differently when I could go out tomorrow and put every single penny I have into equities or any number of even riskier investments without the FCA intervening around whether my choice is sensible and appropriate or not?
What are you giving up that offers a guaranteed income (broadly speaking)?JulianPH said:
- FCA authorised and regulated financial advisers prove to be untrustworthy (by no means all of them, but half of the advice reviewed was found to be unsatisfactory).
"Our results are based on our targeted work and are therefore not representative of the whole market."
Hopefully not representative of the market as a whole....
Derek Chevalier said:
bhstewie said:
hstewie said: Why are pensions viewed so differently when I could go out tomorrow and put every single penny I have into equities or any number of even riskier investments without the FCA intervening around whether my choice is sensible and appropriate or not?
What are you giving up that offers a guaranteed income (broadly speaking)?I take the point around DB's but it feels odd that it doesn't extend further - note I'm not saying it should simply asking the question around why DB's are viewed so uniquely.
Derek Chevalier said:
JulianPH said:
- FCA authorised and regulated financial advisers prove to be untrustworthy (by no means all of them, but half of the advice reviewed was found to be unsatisfactory).
"Our results are based on our targeted work and are therefore not representative of the whole market."
Hopefully not representative of the market as a whole....
Obviously the FCA review of DB transfers was limited to those firms with the permissions to undertake such advice.
I would also hope this was not indicative of the whole advisory market.
The origins and expected solution to this problem may be found in RPPD. The letter refers not so much to bad advisers, but the moral hazard presented by bad pension and fund companies, and SIPP providers. Alas, we are only as strong as our weakest link, and we are let down by some carcinogenic examples of all of the above.
I am looking forward to reviewing the MI which some of the more peripheral product providers collate, and what due diligence they perform on the investments they are responsible for facilitating to some of their advisers. By way of bolstering jaded public faith, and shamelessly exploiting the knowledge gained through his copper bottomed reputation with many great advisers, could Julian explain how he navigates this perilous field to ensure that his retail customers achieve optimal outcomes?
https://www.handbook.fca.org.uk/handbook/document/...
I am looking forward to reviewing the MI which some of the more peripheral product providers collate, and what due diligence they perform on the investments they are responsible for facilitating to some of their advisers. By way of bolstering jaded public faith, and shamelessly exploiting the knowledge gained through his copper bottomed reputation with many great advisers, could Julian explain how he navigates this perilous field to ensure that his retail customers achieve optimal outcomes?
https://www.handbook.fca.org.uk/handbook/document/...
Ginge R said:
The origins and expected solution to this problem may be found in RPPD. The letter refers not so much to bad advisers, but the moral hazard presented by bad pension and fund companies, and SIPP providers. Alas, we are only as strong as our weakest link, and we are let down by some carcinogenic examples of all of the above.
I am looking forward to reviewing the MI which some of the more peripheral product providers collate, and what due diligence they perform on the investments they are responsible for facilitating to some of their advisers. By way of bolstering jaded public faith, and shamelessly exploiting the knowledge gained through his copper bottomed reputation with many great advisers, could Julian explain how he navigates this perilous field to ensure that his retail customers achieve optimal outcomes?
https://www.handbook.fca.org.uk/handbook/document/...
I'll have some of whatever you were drinking last night.I am looking forward to reviewing the MI which some of the more peripheral product providers collate, and what due diligence they perform on the investments they are responsible for facilitating to some of their advisers. By way of bolstering jaded public faith, and shamelessly exploiting the knowledge gained through his copper bottomed reputation with many great advisers, could Julian explain how he navigates this perilous field to ensure that his retail customers achieve optimal outcomes?
https://www.handbook.fca.org.uk/handbook/document/...
It takes a truly special type of financial adviser to take the view that this statement was not about addressing bad advice from regulated financial advisers.
If you want to know more about how we navigate this then keep an eye on the news today.
You already know that we insist on a regulated adviser being in place on all of our SIPPs and ban them (and any third party investment manager the adviser recommends) from investing in any FCA classed non-standard assets.
What you will find out today is that we are now banning all DB pension transfer business, as we are not prepared to take on the liability for the advice given by completely unconnected third party financial advisers such as yourself.
lol
JulianPH said:
I'll have some of whatever you were drinking last night.
It takes a truly special type of financial adviser to take the view that this statement was not about addressing bad advice from regulated financial advisers.
If you want to know more about how we navigate this then keep an eye on the news today.
You already know that we insist on a regulated adviser being in place on all of our SIPPs and ban them (and any third party investment manager the adviser recommends) from investing in any FCA classed non-standard assets.
What you will find out today is that we are now banning all DB pension transfer business, as we are not prepared to take on the liability for the advice given by completely unconnected third party financial advisers such as yourself.
It takes a truly special type of financial adviser to take the view that this statement was not about addressing bad advice from regulated financial advisers.
If you want to know more about how we navigate this then keep an eye on the news today.
You already know that we insist on a regulated adviser being in place on all of our SIPPs and ban them (and any third party investment manager the adviser recommends) from investing in any FCA classed non-standard assets.
What you will find out today is that we are now banning all DB pension transfer business, as we are not prepared to take on the liability for the advice given by completely unconnected third party financial advisers such as yourself.
bhstewie said:
hstewie said: If I go out tomorrow and sell my home and all my goods and put the lot in pork bellies or BitCoin that doesn't seem too bright, but I'm allowed to do so.
I take the point around DB's but it feels odd that it doesn't extend further - note I'm not saying it should simply asking the question around why DB's are viewed so uniquely.
It’s arguably the nature of what that money is ringfenced for as much as anything. I take the point around DB's but it feels odd that it doesn't extend further - note I'm not saying it should simply asking the question around why DB's are viewed so uniquely.
The chap who sold his family home, moved his kids into a camper van and invested everything in bitcoin is an idiot. I don’t think there’s anyone alive who read that news article and contemplated for one moment that they were looking into the eyes of a stone cold genius.
So on the one hand, as a society, we humans know and fully appreciate that we are capable of making seriously stupid life choices. But we also know that most of the time the bulk of an individual’s wealth is in their property and that does self regulate enormously. Of course we know of people who made enormous gains through Right to Buy and then cashed in and are back in supported housing. Some of those people will have been very smart, some maybe most, not so. But generally speaking, it isn’t any form of significant issue so there is no real need to try and protect people from such a low risk. The truth is that we can all cash in and go punting on bitcoin but we simply don’t. And we can’t really be talked into it which means there is no big pay day for criminals to go around talking people into doing it.
Conversely, if we look at pensions it is a different matter. Firstly, as a society we just don’t want retired people making themselves penniless and we also want to protect the more vulnerable from criminals.
What comes into play with pensions is that it isn’t financial asset that extends far further into far more social demographics than home ownership. Home ownership also requires a conscious and major decision and commitment and it’s not typically the type of transaction that is undertaken by people who lack natural fiscal responsibility. But with pensions very many have been forced into workers and generally hidden away and so when the ability to suddenly tap this wealth appears the mindset of its owner can fall under the same mindset as the ‘lottery scenario’.
We know this risk exists and so as a society we take the decision to try to protect consumers from this risk. The argument here being that the regulations save more vulnerable people than it inconveniences non vulnerable. And that is a good thing. Socially the less vulnerable should easily chose very minor inconveniences if at the other end they serve to protect the more vulnerable. It’s a balancing act and we clearly get it wrong from time to time but it doesn’t mean that we should constantly strive to find and protect that balance.
On top of that we have the real killer reason and that is criminals. White collar organised crime, fraudsters and just the plan morally bankrupt.
Millions of people who have grafted all their lives in pretty crappy jobs and generally making ends meet to raise their family suddenly being told that they have £1m? We know that a significant number will go loopy if given free reign but more importantly we know that every single one of them is going to be set up by the scum of the earth, given a wash and a suit, trained in double glazing techniques and released like a pack of wolves to pillage, plunder and generally harvest the vulnerable.
From payday loans, through minibonds to pensions all lax, negligent or incompetent regulation ever results in is the stripping of essential wealth from the most vulnerable to those that have a good living from sucking the blood out of their victims.
The actions of the FCA above appear to me to just be adding additional costs and burdens to one group whose job isn’t to be the backstop police/regulator while in addition opening up further opportunities for the criminally minded.
bhstewie said:
hstewie said: What's that saying in plain english?
Looks a little bit a "Well we sent a letter out so don't blame us" type document?
Looks a little bit a "Well we sent a letter out so don't blame us" type document?
bhstewie said:
hstewie said: What's that saying in plain english?
Looks a little bit a "Well we sent a letter out so don't blame us" type document?
It’s putting not just advisers, but also product providers and distributors on notice, that they must have meaningful and suitable measures in place to identify any practice which is unsafe and/or could lead to mis-selling claims. Providers and Distributors must be able to have suitable MI in place to identify if, for instance, a single ‘rogue’ adviser who simply trots along from discredited investment solution to discredited investment solution, yet does nothing about it. Looks a little bit a "Well we sent a letter out so don't blame us" type document?
Following Ju’s proffered information earlier, I saw an editorial today about this particular issue which linked this with the adviser involved in the BSPS debacle. The FCA letter raises the possibility that a product provider or distributor must be able to explain why the adviser in question was able to suddenly sell a brand new fund, with a prohibitive exit penalty, via three people who were involved just months before in the Strand debacle, for a peppercorn fee, to steelworkers in an area of about 12 square miles.
The FCA letter is suggesting that a safe distribution chain is only as strong as its weakest link. Just because a product provider can use regulated advisers to sell its products, there is nothing to suggest that it *must*. We all have our part to play to ensure outcomes aren’t sub optimal. Advisers predominantly offer a good service, and are let down by a few rotten eggs, and it might be the case that providers and distributors are, also. Through his gesture, I have no doubt that Ju is trying to distance himself from those providers who may be exposed to complaints and litigation through their incompetence, an inability to embrace best working practice, or spikes of moral hazard.
Well done Julian!
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