Financial Advisors give bad advice - FSA reports

dunstonh

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 am not offering you advice and I wouldnt give it to you anyway. I would sack you as a client as you are too close minded and I don't want to deal with people like that.

However, what you have said about your situation does not mirror what the FSA report was about. The report was about inducements given to members to encourage them to leave the final salary scheme and that in most cases it is a bad thing to do. Nothing to do with financial advice. You indicated you were given advice to leave your scheme. So, which is it? You may well have valid reasons to criticise certain individuals but at the moment, a bit like the OP, you seem to be linking unrelated things to suit an agenda.

jamesd

bigfreddiel 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.

Where? I'm pleased that it is as low as 55%, though lower might be better. One US scheme made an offer that was expected to be in the interests of something like 5% of members and found more than 90% taking it. There's a very high propensity for consumers to take lump sums and cash up front unless they get advice.

bigfreddiel wrote: »

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

Are they being given any advice, good or bad? Who by?

bigfreddiel wrote: »

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

The FSA is a big part of the problem. It sets the rules for transfer value analysis that IFAs are required to use. It is changing those rules to be more pessimistic about transfers.

bigfreddiel wrote: »

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.

So you should. Such transfers can be of value in cases like these, and others:

1. Where the scheme provides spousal benefits but the member has no spouse. The transfer value will include money for the spouse who doesn't exist and that many can be used to increase the income of a single person instead.

2. Where the life expectancy of the individual is lower than that of the typical scheme member. The transfer value will use scheme expectancies, the member can use their own individual one to get a higher income via an enhanced or impaired life annuity or a scheme drawdown pension.

3. Where the member is a skilled and experienced investor, particularly for members of younger ages.

4. Where the member will be spending on non-Pound currency and wants an income with reduced exchange rate risk.

It's good for companies to offer nice transfer deals that can be taken up by those who will benefit from them. It's unfortunate that take-up rates suggest that many who shouldn't take the deals, do take them.

Some of the incentives are wrong:

A. Companies will naturally want to shed risk and offer inducements to reduce their risk.
B. Companies can select an IFA firm that has high take-up rates, implying some market pressure that can cause the IFA firms with highest transfer rates to get the business. Individuals don't have to use the company's IFA and would be daft to do so except for initial screening because of the inherent conflict of interest. Better to ask the company to pay some of the cost of the individual's own IFA.

It'll be sad if cash payments go away because they can be a very useful and appropriate thing for those who can benefit from the and the associated transfer.

fairleads

dunstonh wrote: »

I am not offering you advice and I wouldnt give it to you anyway. I would sack you as a client as you are too close minded and I don't want to deal with people like that.

You are rapidly becoming your own, and the industry's, worst enemy. But I for one thank you for showing us your true, and very unprofessional, colours.

somethingcorporate

fairleads wrote: »

You are rapidly becoming your own, and the industry's, worst enemy. But I for one thank you for showing us your true, and very unprofessional, colours.

I disagree, dunstonh freely gives up a massive amount of his time to provide the uneducated a reasonable, informed opinion on evidently a very complex, poorly understood and easily criticised part of the financial industry.

Sometimes his replies (as everyone's) can be short and to the point but given the number of numpties we have coming on the boards posting questions that are answered in post 1 of sticky 1 that cannot be bothered to search for, perhaps you can have a bit of sympathy for those that do give up their time to help others.

I am not an IFA, nor do I use one. I have no axe to grind apart from an unhealthy interest in pensions.

jamesd

fairleads wrote: »

You

We sack clients at my place as well. For the really deserving cases we order an audit first. In some cases it's not worth having someone as a client and better to let them cause grief for others in our business instead. Any business involving customer service gets to know that some business just isn't worth having. Even when, like my place, the last customer survey ratings were 100% of respondents satisfied with service provided.

atush

Sapphire wrote: »

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.

Actually, No. No IFAs come here and are rude and sarcastic- that is left to the IFA bashers.

Glad you got compensation, but again it was your company that wanted to get shot of your FS pension and paid someone to 'advise' you. And it is now illegal/difficult to get anyone to leave a FS pension as they would most likely have to be paid compensation as you were.

fairleads

jamesd wrote: »

We sack clients at my place as well. For the really deserving cases we order an audit first. In some cases it's not worth having someone as a client and better to let them cause grief for others in our business instead. Any business involving customer service gets to know that some business just isn't worth having. Even when, like my place, the last customer survey ratings were 100% of respondents satisfied with service provided.

Pray tell us just what 'business' are you in, and, are you the principle? The reason i ask is that the word 'sack' is more commonly used on the shop floor rather than in professional circles.

jamesd

A large business where we have a contractual right to require a customer to submit to a particular type of audit, which we do when we have reason to believe that there has been fraud.

The word sack was used because that's the word that dunstonh used. If you prefer alternative language, we'd refer to our country audit team and they would then take the matter up with the legal team to enforce our rights against the customer. If the customer declined to accept the audit we'd go to court first to compel them.

BobQ

dunstonh wrote: »

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?

I'm more sceptical than most about some advice given by some IFAs but I agree this is an abusrd conclusion he has made. There is no real evidence that the bad decisons the employees made were even connected to the advice given.

Moby

bigfreddiel 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.

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

Like everything else you get good and you get bad advice from an IFA, what I find tiresome though is the rather patronising tone of some of the advice given on here...for example on this thread page :-

Quote:


Is post retirement not a little too late to
consider how much you need to be comfortable?

I know its not funny but I'm afraid I couldnt help laught at that.





I had someone recently seek advice after commencing their pension. They
had taken max lump sum from the occ scheme and had a small personal pension they
didnt need capital from. I explained to them that they should have taken no
lump sum on the occ scheme and that they should take the max lump sum on the
personal pension. Over a typical life expectancy, their decision will probably
cost them about £40,000. It is not uncommon for people to seek advice after
making the decision.

What a rib tickler of a story probably shared with the other suits over a glass of port and imparted with a hint of relish!



Seriously though...it needs to be acknowledged more that many people who come on these threads know absolutely nothing about finances and are possibly also not really interested in financial matters as a complete lifestyle choice but just need a bit of advice!....... and by the way its also probably highly unlikely that they are being encouraged to leave their pension schemes by the satanic shadowy figures of their union reps!;)