IFAs ignorant about annuities

whiteflag_3

EdInvestor wrote: »

I'd like to encourage ACH to set up a direct to consumer annuity operation so people can do their own shopping around for annuities.If they'd like to rebate some of the commission as well, that would be an added bonus

this is the same outfit that you said "avoid" in this thread isnt it


http://forums.moneysavingexpert.com/showthread.html?t=1247921&highlight=rockingham

MiloH

DiggerUK wrote: »

The problem as you well know is that most people who meet someone who tells them they are an IFA, stop there.

Yes, I'm sure that's right.

DiggerUK wrote: »

Why is there no obligation of an IFA to declare anything to the punter.

In my first meeting with clients they receive a business card, my firm's Terms of Business, a document called "Key Facts About our Services" (which includes an explanation of our independence, the service we offer, how we get paid, our FSA registration, and what to do in the event of a complaint) and a further document called "Key Facts About the Costs of our Services" (which explains that we can work for a fee, commission or combination of the two, details what our fees are and compares the maximum commission receivable for different areas of advice against the FSA's market average). That's a fair bit more than I get when I hand my keys to the mechanic for my car service and yet my last service cost me a great deal more than most fees I issue.

DiggerUK wrote: »

Why do you not accept the simple fact that the IFA industry is tainted by sharp practice.

Name me an industry that isn't.

Historically it has been an extremely dodgy industry. I started work at the time that regulation was introduced in 1988. I remember the company I worked for signed up a team of tied advisers who the week before had been vacuum cleaner salesmen. Client questionnaires were signed by Ronald Reagon.

Over the 20+ subsequent years we've had pensions misselling and endowment misselling, both of which were due to industry self-regulaton that started in the late 80s. Failing to regulate ourselves the industry came under the wing of what's now called the Financial Services Authority where layer upon layer of regulation has gradually forced many of the commission salesmen out of the industry. The FSA has been doing to the financial advice industry what it should have been doing to the banking industry.

There are still sharp practices and sharp geezers in the industry, but I believe they are dying breed.

EdInvestor

whiteflag wrote: »

this is the same outfit that you said "avoid" in this thread isnt it


http://forums.moneysavingexpert.com/showthread.html?t=1247921&highlight=rockingham

No I was suggesting people should avoid SLS funds as a drawdown investment.Quite a prescient post actually given recent Keydata news.It didn't even take 5 years for the capital to disappear. :mad:

MiloH

EdInvestor wrote: »

No I was suggesting people should avoid SLS funds as a drawdown investment.Quite a prescient post actually given recent Keydata news.It didn't even take 5 years for the capital to disappear. :mad:

Presumably this is what investors hold where their About Us page states "Rockingham has developed their own ‘third way’ product with a return of 10.25% providing one of the best retirement income solutions in the UK". If that's what's in their offering then that's very worrying, not so much for the risk of fraud which happened with Keydata (which could happen in other investments), but with the illiquidity, lack of diversification and valuation risks. Senior Life Settlement investments can be highly illiquid in the event of a run on funds and I wouldn't like to explain to a client relying on their pension income that it had to stop for six months...

DiggerUK

MiloH wrote: »

There are still sharp practices and sharp geezers in the industry, but I believe they are dying breed.

The problem for many is that the consequences of what has happened only comes to light years later.
We still have union members coming to us at retirement after all this time in great distress.

Why is what your firm does in disclosure, not an industry standard?

My experiences mean I could get very actively involved in ensuring they become a "dying" breed.

EdInvestor,
From your FT link it appears that 30 of the sample were involved in annuities, 60% of which declared themselves inadequate. That is a very high number. Even if you make allowances for the small sample.

MiloH

DiggerUK wrote: »

The problem for many is that the consequences of what has happened only comes to light years later.
We still have union members coming to us at retirement after all this time in great distress.

Sure, but hopefully that's a reflection of the practices employed light years ago.

This is a litigious age and IFA business owners know how expensive professional indemnity insurance is and the costs of bad practice. Most IFA businesses know that we no longer live in an age of "business at all costs".

DiggerUK wrote: »

Why is what your firm does in disclosure, not an industry standard?

My understanding is that this is industry standard and that if an IFA is mystery-shopped by the FSA and doesn't provide this information then there will be consequences...

DiggerUK

MiloH wrote: »

My understanding is that this is industry standard and that if an IFA is mystery-shopped by the FSA and doesn't provide this information then there will be consequences...

OK, this is a bit nit picky.
Do you have to say to a punter who asks about what to do with their pension pot, if you are capable and qualified to give advice.
I only ask because you didn't make it clear in your original post.

MiloH

DiggerUK wrote: »

OK, this is a bit nit picky.
Do you have to say to a punter who asks about what to do with their pension pot, if you are capable and qualified to give advice.
I only ask because you didn't make it clear in your original post.

Every IFA and firm has certain FSA permissions. For example I'm authorised and regulated as a Pension Specialist but I'm not authorised as a Mortgage Adviser. If someone comes to me for mortgage advice I tell them I'm not authorised, I can talk generically about mortgages but if clients want mortgage advice I'll refer them to a mortgage adviser. Advising on an area not within your permission is unlikely to be covered by the firm's professional indemnity insurance, may result in business submitted being rejected by the provider if they know the firm is not permitted to advise in that area, and is a breach of FSA rules and could lead to being banned. Any IFA giving advice on an area where they are not authorised is risking their livelihood.

DiggerUK

MiloH,
As we both know, there is a shady side to every profession.
All EdInvestor's thread put was a PR spin from a firm that recognises that public perception, and decided to cash in on it by presenting themselves as the good guys.
All the usual suspects could do was jump on Ed who points out some unacceptable home truths about the IFA industry, and that truth is that many still do not have a professional disclosure policy, or bend the rules without breaking them.

It's not much comfort to our members if I tell them that "things aren't like that anymore".

whiteflag_3

EdInvestor wrote: »

No I was suggesting people should avoid SLS funds as a drawdown investment.Quite a prescient post actually given recent Keydata news.It didn't even take 5 years for the capital to disappear. :mad:

But the Rockingham Retirement product invests 100% in SLS Funds ( One bond im led to believe) and Miloh has summed up the problem suberbly.

If they have this gung ho attitude to their clients retirmement funds it sends out a rather worrying to message about how they might organise other parts of their business.