IFA fined 1.1m for annuity/drawdown/transfers misselling

EdInvestor

whiteflag wrote: »

So Ed, that being the case why have you used this forum for the last 2 or 3 years to actively encourage posters with no knowledge of either pensions or investments to go the DIY route rather than, as you are now suggesting seek "honest and skilled advice" ?

I encourage people to spend some time to acquire financial and investment knowledge before going DIY - or with an advisor, as a well informed investor will be able to spot bad advice better than a novice.

Unfortunately the standard of much of the advice available is so low that you are often not reducing risk by going the advice route - as we see today.

whiteflag_3

EdInvestor wrote: »

I

encourage people to spend some time to acquire financial and investment knowledge before going DIY - or with an advisor, as a well informed investor will be able to spot bad advice better than a novice.

Well im afraid I have to disagree with you there. As you know there have been many debates over the last few years and they normally start with you advising a SIPP (low cost obviously) from the outset, with no encouragement to go and get some knowledge first. I suggest you go back and read some old threads.

Unfortunately the standard of much of the advice available is so low that you are often not reducing risk by going the advice route - as we see today.[/

quote]

As someone who has regular dealings with the FSA, Im going to wait until the full story and full facts about the "missselling" at AWD are out and then make a judgement.

EdInvestor

http://www.ifaonline.co.uk/public/showPage.html?page=ifa2006_articleimport&tempPageName=825774

Following further declines in Q3, AWD Chase de Vere says it is expected to lose €13m this year, with total UK restructuring anticipated to cost the firm an additional €27m.The firm hopes to return to profitability in 2010..
AWD has increased its number of financial advisers and its own advisory platform and forecasts it will have over £400m of assets by the year end.It also says it has “successfully addressed” the issues surrounding yesterday’s FSA £1.12m fine for pension mis-selling.
AWD Group CEO Mike Kirsch says the restructure will advance the firm’s goal to become the UK’s leading IFA business."We are now one of the best capitalised and most financially strong advisory businesses in the UK, which will enable us to continue to attract the very best advisers in the market to join our business.

This IFA is making big losses and has just been fined for the second time for misselling (one of the biggest fines ever). Yet it aims to be the leading IFA firm in the country and claims to be financially strong and to attract 'the best advisors'.
Quite frankly what does this say about the IFA business as a whole if this persistent offender is seen as a leading firm?

Dithering_Dad

whiteflag wrote: »

An all time classic from Edinvestor!

So Ed, that being the case why have you used this forum for the last 2 or 3 years to actively encourage posters with no knowledge of either pensions or investments to go the DIY route rather than, as you are now suggesting seek "honest and skilled advice" ?

And lets not forget Ed's constant advise that people ditch pensions in favour of ISAs, regardless of their circumstances; causing people who have little enough spare money for pension provision to lose a valuable 20% tax incentive in their pension pot.

Another annoying assertion she makes is that the state pension, coupled with S2P provision will use up the full £10k age related tax free allowance, when in reality the basic state pension is £90.70 per week and the average S2P payout is £12 per week, making an annual total of £5340.40 per year.

This means that someone with a pension pot of £100k would receive an annual annuity income of £3393.12, which means that they're still under the age related allowance and so all of their state and personal pensions are paid tax free.

So a 20% tax incentive on the way in and tax free on the way out. Yet Ed still advises ISAs to everyone, even those who have little enough chance to even build a £100k pension pot.

As I have said before, it's a disgrace and she should be ashamed of herself for promoting her own hobby horses to the detriment of people's finances.

EdInvestor

Dithering_Dad wrote: »

Another annoying assertion she makes is that the state pension, coupled with S2P provision will use up the full £10k age related tax free allowance

For some people it will. For many people it will take them above pension credit level (c.6550), particularly women, who will mostly after 2010 be able to claim the full basic state pension.It is always best to check your entitlement to the two state pensions as it is different for everyone.

Get a forecast here:

https://www.thepensionservice.gov.uk.

Do not rely on averages, as they will always be wrong.

It is worth saving in pension format to make up the gap between your state pensions level and the tax free level of 10k.Otherwise, there is very little in favour of pension saving for people paying basic rate tax with no company pension, as the 20% tax relief is recouped by having to pay 20% tax on the penswion income after you retire. The state pension is taxable too..Plus of course you lose control of the capital forever and obtain a pretty derisory income (these days) in return.

On the other hand if the money is in an ISA, you keep control of it, can access it tax free, can invest it in whatever you choose and can leave it to your family when you die.

An ISA is a perfectly viable method of saving for retirement and will suit many people far better than a pension, which is a much riskier form of investing because of the loss of control over the money alone..

Dithering_Dad

EdInvestor wrote: »

It is worth saving in pension format to make up the gap between your state pensions level and the tax free level of 10k.

Quite so, but this isn't routinely what you advise. Generally speaking the majority of working class people who venture onto the MSE pensions board asking for pensions advice will be above the pension credit level and below the £10k tax free allowance. People who fall into this category are always better off by putting their retirement savings into a pension rather than ISAs.

Given that £100k provides an RPI related annuity of £3393.12 (including 50% pension for spouse) and given the the majority of working class people have not a hope of even saving this much money in their pension pot and given that if they do, then they can obtain 25% of their pension in cash tax free, would you agree that the majority of people who come onto MSE with no pensions savings should be advised to start a pension?

As far as your point about ignoring averages, I find it to be very revealing. Unless we know a lot fo information about the MSE poster, you can only assume they're 'Mr or Mrs average' and base advice on this premise.

If you ignore averages (as you say) and you don't bother finding out more information (as I have seen), how on earth can you justify the advice you give?

dunstonh

Quite frankly what does this say about the IFA business as a whole if this persistent offender is seen as a leading firm?

It is not seen as a leading firm. Every business is going to present a positive image of itself regardless of the business type. Talk about letting your anti-IFA stance cloud your judgement.

In the first months of this year, the FOS received 62,967 complaints. 1765 relate to IFAs. That is 2.8% of complaints received. In 2007 it was 4%. That followed a drop of 2/3rds from the previous year. The trend continues to show an increased satisfaction with IFAs.

Even before this improvements, Sir Christopher Kelly (Chairman, FOS) said back on 29th Nov 05 that:

...it is worth saying a little about what our experience of the individual advice sector has been. It is not entirely what you might have expected if you were to believe some of the more lurid stories in the trade press.

The facts tell a very different story. Our experience is that the tabloid focus on disgruntled, confrontational, mis-selling IFAs is completely unrepresentative of the huge majority of hardworking professionals keeping their heads down and performing a valuable service for clients.

Indeed, on the whole, the Financial Ombudsman Service’s experience tells a remarkably positive story for IFAs. Despite the significant role you have in the selling of financial products, the number of complaints we receive that are about IFAs is modest. Even in areas like pensions, less than a quarter of the cases we receive are about IFAs. Overall just 14% of all the complaints we receive are against independent advisers.

In contrast the top 10 financial services groups account for nearly two thirds of our work.

On outcomes the IFA sector can in tell an equally positive story. In the present financial year to date, only around 20% of all cases against IFAs were upheld. So in 4 out of 5 cases involving Independent Financial Advisers we found in favour of the firm. In contrast the uphold rate for other sectors was over 30%.

Put another way, out of every 100 cases from all sources coming to the Ombudsman we find in favour of the complainant in only about 30 of them; and only 3 of those cases will concern Independent Financial Advisers. This statistic is the
more remarkable in the context of the amount of business conducted by IFA firms.

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So Ed, whilst you promote an anti IFA stance on these boards, the facts do not match the reality of the situation. And remember, that the reduction in complaints has occurred in a period when people are being encouraged to complain more by claims companies etc.

shedboy52

Is the FSA looking in general at pension transfer misselling? If so where can I read more and more about it?

Thanks

dunstonh

shedboy52 wrote: »

Is the FSA looking in general at pension transfer misselling? If so where can I read more and more about it?

Thanks

They are not looking at it specifically. It is reviewed as part of the normal visits.

I know two local firms that have had FSA visits recently and the focus was TCF, explicit charges added to contracts above the default and pension transfers. However, you would always expect transfers to figure on a visit given the high risk nature of that transaction. The hot potato for both of those firms wasnt the transfers as it turned out but explicit charges above the default. I also know that one of the firms was picked because they havent sold a stakeholder pension in the last 7 years despite the majority of their business being pensions and them having 7 or 8 advisers. That was like waving a red flag to the FSA saying come and get me.

The FSA has been issuing warnings on SIPPs now for a couple of years and highlighting that they feel they are over used and not appropriate for most people who are taking them out. So, any firm with a high SIPP ratio is making themselves more visible to a compliance visit.

EdInvestor

shedboy52 wrote: »

Is the FSA looking in general at pension transfer misselling? If so where can I read more and more about it?

Thanks

The main focus post A-day seems to be on transfers out of occupational pensions and unnecessary transfers into SIPPs by advisors seeking upfront commission.

FSA pension transfer search

There is plenty of old compliance material around on transfers relating to the giant pension misselling scandals in the 1990s.