Financial Advisors give bad advice - FSA reports

bigfreddiel

The FSA has reported that the current trend of offers to buy out members of final salary pension scheme is taken up by 55% of those whoe get the offer.

The FSA has reiterated that the majority of these deals were not in the members interest.

I'm curious as to why people are being given bad advice?

No doubt an IFA would see through any such bad advice - or are they part of the problem?

I know everyone's financial position is unique but I would certainly think twice and then some serious reseach and spreadsheet work before giving up my final salary pension scheme.

fj

bigadaj

I would guess that it is actually companies that are offering these inducements rather than financial advisers. F or most people in the long term then final salary pensions will be a better option, but you may not live that long, have huge current debts, like the idea of paying down a mortgage so it's up to the individual, and dependent on the offer.

sandsy

Cash incentives are definitely a big part of the problem. But there's expected to be an industry code of conduct later this year which will effectively ban these.

My reading of the FSA papers was that they're worried that people are being misled into accepting offers by misleading paperwork which appears to offer the prospect of higher yields than might be available in practice, especially given the average person's appetite for risk which isn't usually that great.

Average take up rates are about 30%, I think. That's what KPMG found last year and was quoted in the FSA paper. Some of the financial press seemed to have found higher rates in some cases - there's certainly worries that advisory firms with high rates use these to market their services to DB employers looking to derisk.

dunstonh

No doubt an IFA would see through any such bad advice - or are they part of the problem?

How have you turned the FSA report into one of advisers giving bad advice?

It is about companies offering inducements to effectively play on short term greed to get people to leave a good scheme to join an inferior one. What's next for you? Tube strike during Olympics shows financial advisers give bad advice?

bigadaj

I would agree that it is a slightly bizarre accusation, but dunstonh if you bite every time then they are going to keep on coming!

atush

Another stupid post by anti IFA bashers that is factually incorrect as per usual.

It is the Companies who have these FS pensions on their books (mostly showing big deficits) that are offering inducements to get these pensioners off their 'books'.

Generally we here (incling advisors) do tell those who ask not to take thses inducements. But you do have to factor in should these companies go bust int he mean time, that they would lose some of their pension benefits anyway. And companies can't always survive hard times with such financial black holes.

Sapphire

atush wrote: »

Another stupid post by anti IFA bashers that is factually incorrect as per usual.

Actually, no – and as usual the IFAs (one in particular) come onto this board and use nasty, sarcastic language to defend their industry, which has often been found wanting, trying to silence posters who are posing quite reasonable questions.

For your information, back in the day when I was more naive than I am now and believed IFAs were honest and could be trusted, one IFA who worked with the company I worked for persuaded me to transfer a final salary pension from a company I'd worked for previously. The illustrations he quoted were massively optimistic.

The product was mis-sold and I received compensation to the tune of several thousand pounds from the IFA's company.

dunstonh

Actually, no – and as usual the IFAs (one in particular) come onto this board and use nasty, sarcastic language to defend their industry, which has often been found wanting, trying to silence posters who are posing quite reasonable questions.

Really? where on this thread is that happening?

What has your situation got to with this thread or the FSA report?

Sapphire

dunstonh wrote: »

Really? where on this thread is that happening?

What has your situation got to with this thread or the FSA report?

Typical, predictable response.

My situation is directly relevant to the FSA report:

'The FSA has reported that the current trend of offers to buy out members of final salary pension scheme is taken up by 55% of those whoe get the offer.

The FSA has reiterated that the majority of these deals were not in the members interest.'

Which is precisely what happened to me.

Don't bother to respond with more of your sarcastic 'advice' (or other comments). I do not welcome your advice.

CLAPTON

Sapphire wrote: »

Typical, predictable response.

My situation is directly relevant to the FSA report:

'The FSA has reported that the current trend of offers to buy out members of final salary pension scheme is taken up by 55% of those whoe get the offer.

The FSA has reiterated that the majority of these deals were not in the members interest.'

Which is precisely what happened to me.

Don't bother to respond with more of your sarcastic 'advice' (or other comments). I do not welcome your advice.

I'm neutral here but did you seek or receive advice from an IFA; if so what did they say?

jem16

Sapphire wrote: »

'The FSA has reported that the current trend of offers to buy out members of final salary pension scheme is taken up by 55% of those whoe get the offer.

The FSA has reiterated that the majority of these deals were not in the members interest.'

Which is precisely what happened to me.

The offers to leave a final salary pension come from the company who provide the final salary pension. This is usually done as they are trying to get members out of a final salary pension which the company can no longer afford to provide. The company has usually stopped its final salary pension to new members.

The offer usually consists of a higher transfer value to entice you to leave.

This does not sound like your earlier description where you said;

Sapphire wrote: »

one IFA who worked with the company I worked for persuaded me to transfer a final salary pension from a company I'd worked for previously.

No mention of you being enticed to leave by your former company which is what this thread and the FSA report is about.