IFAs "over-cautious" on With profits surrenders

EdInvestor

Providers do not give IFAs suitable training and relevant information to enable them to give advice on with-profits, according to the Association of IFAs...The research of 564 adviser firms reveals the general nervousness of advising in an area which has been the subject of much adverse comment has resulted in many advisers having an overly-cautious approach when considering recommending clients to switch out of with profits.

Although 85% of advisers feel they have sufficient knowledge to advise on with-profits, almost three quarters (72%) say providers do not give IFAs suitable training and relevant information to enable them to give advice.AIFA says this raises questions about whether advisers’ confidence in advising in this area is matched by their competence, since a large number feel they are not equipped with the right tools to do the job.

IFAonline

dunstonh

Providers do not give IFAs suitable training and relevant information to enable them to give advice on with-profits, according to the Association of IFAs...The research of 564 adviser firms reveals the general nervousness of advising in an area which has been the subject of much adverse comment has resulted in many advisers having an overly-cautious approach when considering recommending clients to switch out of with profits.

Providers are very poor at providing data upon request. When you dont have the data, you have no choice but to make assumptions and it is usually best to be more cautious in those circumstances.

Your post is no doubt your usual dig at IFAs but I see no problem in what has been said.

toonfish

if the report hadn't been written this way Edna would be twisting on about excessive churning

dunstonh

Yes. Damned if you do. Damned if you dont.

EdInvestor

dunstonh wrote: »

Your post is no doubt your usual dig at IFAs but I see no problem in what has been said.

Not at all.

I just thought readers might like to know why IFAs repeatedly suggest that people don't surrender their endowments, when it's pretty obvious from the figures supplied that if they do so, they will at the very least gain by reducing their exposure to risk.

jamesd

EdInvestor, here's a rather different bit of highlighting of the problem: 'Although 85% of advisers feel they have sufficient knowledge to advise on with-profits, almost three quarters (72%) say providers do not give IFAs suitable training and relevant information to enable them to give advice ... Chris Cummings, director general of AIFA, says overall advisers seem to be providing "good practice" when giving advice on with-profits ... He states: "The prevalence of predetermined views about with profits means that advisers should be wary of pre-judging a situation. Less complex and more comparable information about the funds in question needs to be available from providers and advisers need to ensure they are fully informed about the details of the products on which they are advising"'.

It's no surprise that advisers who have sufficient knowledge to advise have trouble making recommendations if the endowment firms don't do basic things like telling them the policy value and likely bonus levels. Nor could you without that information. Nothing is obvious from the figures supplied if the endowment provider doesn't provide decent figures to use.

The article was criticising endowment providers for not providing enough information, not IFAs.

EdInvestor

The point is that the IFAs themselves are saying they are often not well informed enough to give advice on endowments and thus they tend to adopt a "do nothing" approach.

So posters should view IFA advice to do nothing about the endowments with caution, as the advisor may have no idea what he's talking about.It's not his fault, it's just the reality.

JoeK_3

EdInvestor wrote: »

Providers do not give IFAs suitable training and relevant information to enable them to give advice on with-profits, according to the Association of IFAs...The research of 564 adviser firms reveals the general nervousness of advising in an area which has been the subject of much adverse comment has resulted in many advisers having an overly-cautious approach when considering recommending clients to switch out of with profits.

Although 85% of advisers feel they have sufficient knowledge to advise on with-profits, almost three quarters (72%) say providers do not give IFAs suitable training and relevant information to enable them to give advice.AIFA says this raises questions about whether advisers’ confidence in advising in this area is matched by their competence, since a large number feel they are not equipped with the right tools to do the job.

IFAonline

Many thanks for highlighting this area to all the readers and the IFA's amongst us but clearly you have used the article for reasons different to that originally intended.

The articles original heading is " IFAs lack tools to advise on with-profits " – AIFA but you have changed this to suit your opinion.

I have followed your posts regarding endowment policy surrenders for the last four weeks and am disappointed with the standard rules that you apply and ask people to follow when advising them to sell or surrender their policies.

It would be interesting if we could collate them all and see how many times you have recommended people to sell their endowment policies and how many to keep them. You certainly are a good agent for the tep market and in particular one organisation that you keep recommending to sell the policies too....

None of your surrender or sell advice recommendations have you gone to the trouble to find out the cost of replacing the lost life/critical illness insurance costs, nor have you asked if the persons health has changed, could they replace the insurance or are they presently ill, are they funding their ISA's to maximum, are the funding their pension's to maximum, etc.

Having said all that, I can make allowances for you, as you are not an IFA but you certainly have a lot to say for yourself.

Come on, it's a good article but not the way that you have manipulated the words.

There are many things to consider when giving advice and it is based on knowing your client, not ripping things apart and starting again as you tend to treat everyone.

JoeK

EdInvestor

Hello joek

JoeK wrote: »

You certainly are a good agent for the tep market and in particular one organisation that you keep recommending to sell the policies too....

I think you've missed the point here.It is very difficult to get intelligence about the real value of endowments - as the article makes clear even IFAs are having a big problem.

But one way of getting at least an indication of whether your policy is worth keeping or not is to ask the TEP traders if they will make you an offer for it. Obviously, if they will offer you a decent premium, then it might be worth holding onto it yourself, right?

To see if they can get a quote, I recommend posters go to the website operated by the Associatiopn of Policy Market makers, https://www.apmm.org the trade body.

The APMM is not a TEP trader itself, but it offers the useful facility on the site to get quotes from all traders by filling in just the one form.This saves people a lot of time.

Policyholders are then in a position to compare the surrender value with any quote they may have got from a TEP trader, and then also with calculations of the return they would get if they paid off the mortgage.

It should be pointed out, that the correct procedure for anyone who has made a successful complaint about an endowment shortfall is to

a) Surrender the endowment (some insurers require this)
b) Use both the S/V and the redress money to reduce the mortgage after replacing the life cover (if necessary, often it isn't)
c)Increase the monthly mortgage payment by the endowment premium, thus overpaying it
d)Consider remortgaging to a better rate, if available.

People with endowment shortfalls should not normally just do nothing, as their shortfall in many cases (not all) is quite likely to get worse.

JoeK_3

Again, you are only dealing with the surrender or the sale of a policy, what about the other issues that I mentioned?

Your thread of IFAs "over-cautious" on With profits surrenders is nothing like the heading of the article, IFAs lack tools to advise on with-profits " – AIFA.

What about the other issues other than the four points that you mention?

Your perception about IFA's is tainted due to you spending to much time on here and reading feedback given to people on here.

Proper, professional financial advice is personal and specific and not a broad across the board brush that is used in most cases by certain individuals.

Tread carefully, as you may be going into areas that you know little about

JoeK

jamesd

EdInvestor wrote: »

The point is that the IFAs themselves are saying they are often not well informed enough to give advice on endowments and thus they tend to adopt a "do nothing" approach.

Not "on endowments" in general; on the specific endowment in question. Nothing is exactly what the IFA should be doing in that situation. The people to be unhappy with in this case are the endowment providers, not the IFA.

EdInvestor wrote: »

b) Use both the S/V and the redress money to reduce the mortgage after replacing the life cover (if necessary, often it isn't)
c)Increase the monthly mortgage payment by the endowment premium, thus overpaying it

Assuming that the person with the endowment wants to abandon investing, c is incorrect. The new monthly payments must also match the repayment mortgage levels to pay off the mortgage by the end of the term. The endowment payment will normally be too low.

For someone who was correctly sold an endowment poilicy on investment comfort grounds, reinvesting the money may well be a better choice than paying off part of the mortgage. For that matter, even a savings account is often going to be better than paying off part of the mortgage, depending on how old the endowment is and what cash ISA allowances are available.