Early retirement - ill health

SteveT2007

A friend of mine (no, really) is about to retire on the grounds of ill-health. Her company has offered what I think is a fairly generous final salary pension and the option of an additional but meagre (because of her young age) AVC pension. She also has the usual option to take a tax-free lump sum. And, to be blunt, if she lives long enough there will also be some deferred pensions to take later. The situation is complicated because of social services' rules on savings and income, and how much of her income they would then take towards her (conisderable) care costs. I spoke to The Pensions Advisory Service and, although they were very helpful, they could only give general advice. I think she needs expert independent financial advice but how do I find a knowledgeable, trustworthy advisor? I have used an IFA in the past and was distinctly underwhelmed.
Thanks
SteveT

dunstonh

I have used an IFA in the past and was distinctly underwhelmed.

I ought to have this copied and pasted somewhere for every time it comes up.

The term IFA covers a wide range of skills and knowledge. If you see a mortgage IFA (one that spends most of their time doing mortgages) then don't expect them to know much about investments. The same goes for many other areas. You get specialists and general practitioners.

Within that you also have different business models. The more common one is transactional. This means that the adviser only gets paid if you transact business with them and nothing after that. This model is mostly used by the salesforces and larger regional firms. You also have fee based only and NMA IFAs as alternatives.

how do I find a knowledgeable, trustworthy advisor?

Most people in the UK havent seen an IFA before. So asking others if they can recommend one may be a good idea but dont expect many results. Most see tied agents (although research of those has shown that nearly 2/3rds thought the tied agent was an IFA).

You can help your chances of seeing a good IFA. Avoid the salesforces for starters. It doesnt matter what profession you are in, the salesforce mentality of incentives, league tables, sales managers putting on pressure etc is not ideal for good advice. The FOS have stated recently that over half the complaints they get are about just 12 companies (most of those are tied but they are all salesforces). Salesforces also suffer high staff turnover, and their remuneration isnt as much as an "independent" IFA. So expect to pay full charges.

The smaller local firms are more reliant on word of mouth and reputation and get most of their business through referral and looking after what they have. Also, unlike employed IFAs, the owner/partners are financially liable for the advice they give. If its wrong, it comes out of their own pocket. Not so with employed IFAs. That is a good incentive to get it right first time.

From my own experience, I find that poor advice tends to come more from advisers that move around a lot of have no financial stake in the company. Question the adviser on their history. How long have they been an adviser? How long with their current company?

If you need a specialist transaction then see a specialist IFA. If you need an operation, your GP doesnt do the surgery, a surgeon does. The same applies to IFAs. Dont use a GP IFA unless you have a transaction which a GP IFA can do.

And lastly, ask questions. Ask to see the research. Good communication and understanding are key to ensuring you trust the adviser and know they are doing the right thing for you. No decent IFA is going to give advice without research backup. If you see the research, you can judge the quality of it and make a judgement on that quality. Good research usually means good advice.

All that said, according to the FOS, over 80% of advisers out there today have never had a complaint. A lot of the "Poor" reputation comes from tied agents or historical issues from the industry from people who are no longer giving advice. The odds are you will get good advice in the majority of cases.

EdInvestor

You really need an IFA who specialises in long term care and these are very thin on the ground.

Telegraph report

Although Dunstonh's points about salesforces are well made, in the first instance it may be useful to check out the specialist NHFA firm, recently taken over by HSBC, at least to get a grip on the very complex options involved.

Quite a lot of good info on their website

https://www.hsbcpensions.co.uk/nhfa/index.asp

SteveT2007

Thanks both for your advice, especially EdInvestor for the very specific guidance.