DB Pension transfer - IFA costs

cloud_dog

bowlhead99 wrote: »

Yes there is something unfortunate about it., because it has driven up the cost and hassle of obtaining the outcome you want!

You seem to fundamentally misunderstand the point Joe makes, so that you think that he disagrees that the law exists or disagrees that it is fine for people to have some level of personal freedoms. I don't think he is saying that at all.

The facts are:

a) If you have DB /protected rights pensions (other than certain unfunded public service types), it's possible to transfer them to a non DB scheme, but;

b) a potential transfer with a value over a certain valuation will only be able to go ahead if the relevant parties are satisfied the advice requirement has been met;

c) the law and regulations set out what type of regulated professional can give the advice, for it to count;

d) the regulated professionals from (c) are not forced to help you out but can decide what cases they want to take on, and if they do want to take it on, they can decide what they would like to charge for the service. The number of providers in the market together with the price that they want to charge will drive market rates for service and impact availability and affordability of it;

e) the regulator and ombudsman have a reputation, based on previous form, of siding heavily with the consumer when they assess complaints about advisers' behaviour (actions or inactions leading to losses) especially in the higher risk area of DB transfers (exchanging safe /guaranteed benefits for returns that may not be guaranteed);

f) hence the few regulated professionals who hold the requisite permissions may not want to provide the advice due to the potential that the customer comes back with a baseless, frivolous or vexatious complaint that he lost his money after the adviser helped him do a transfer of nice safe benefits and left him to his own devices and a large pot of money was lost without the container being aware that might happen;

g) the IFAs have been warned by their compliance advisers that based on previous form, helping a customer to do his transfer when you have concluded it wasn't the right thing to do based on your analysis, is tantamount to helping him lose his money or worsening his financial position - and so they might be one of the parties who is on the hook for redress;

h) if you as a prospective customer for transfer advice know you definitely want to transfer regardless of advice, you might like to think that you could waive your rights to later complain. If the waiver was bulletproof, an adviser would not be taking on the increasingly uninsurable liability for customers receiving advice and not liking the outcome ten years down the line and going crying to the ombudsman. That would allow the adviser to provide advice without a huge potential 'liability', and more of them would be willing to do it, and market forces would help ensure a lower cost.

i) unfortunately despite what the regulator might say 'should' happen, the regulatory bodies have form in saying that waivers don't work, because they side with the consumer. Even if the consumer is a smart cookie, how was he supposed to know he might become worse off if he didn't comprehend the advice or the waiver. The customer needs to be protected from unscrupulous advisers who might seek to obtain a waiver from a vulnerable idiot.

j) so, even an educated customer can't sign away all rights to redress; the advisers don't trust the concept of waivers because they know it won't get them off the hook if the customer goes crying that he didn't understand that he wouldn't have that nice reliable money to live on if he put all his money in a bad plan that introduced intolerable risk or simply, had risk and a very unlucky outcome. The ombudsman sides with the customer, remember.

As a result of all of the above, the advisers do not have much appetite to carry out DB transfers at low cost. Because their insurers ask them questions about what they have advised on, and they will have to pay a high premium for life just in case the customer comes back bleating a frivolous complaint, and the regulator sides with the customer as noted in (e) and (j), and an uninsured loss could put them out of business which is not something that want.

What Joe has said is that it's the fact that the regulator usually sides with the customer in this area (even insistent clients proceeding against advice), which has created high potential liabilities for advisers and driven IFAs away from providing the advice at low cost.

Joe contends that it is unfortunate that the regulator is so pro-consumer - protecting investors by upholding complaints against advisers even when the investors should be able to stand on their own two feet and take personal responsibility and sign waivers if they are educated enough to comprehend them.

The reason he believes it is unfortunate is that the overly ''if any doubt, protect the customer at all costs and restore the loss of his life savings" attitude is fostering a fear among advisers and their compliance consultants of high future liabilities driving high annual insurance premiums for life. And this fear is directly impacting the availability and affordability of transfer advice services.

There would be a cheaper and more open market for transfer advice if the regulator/ ombudsman would NOT automatically side with the customer who launches a complaint after losing his money a few years after proceeding with a transfer (sometimes against advice) and damaging his wealth. But, they do side with them, so advice is scarce and expensive because few advisers like to help those transfers take place and the ones that do, want enough of a fee to cover the extra insurance premium for life.

You would be happy to sign a waiver because you just want to get the transaction done and you are not going to come back and complain. But the fact that the regulatory complaint could be found in your favour because you say you were befuddled into signing it, means the waiver won't work. As the waiver isn't effective, the adviser is on risk if he helps you. As the adviser is on risk and he knows the regulator sides with the customer if the customer later pretends he didn't understand, the adviser isn't going to give the advice cheaply if at all.

So, the regulator's pro consumer stance, sticking up for the little guy against the big bad advisers, is directly leading to higher costs for the service.

When Joe explains this as "Unfortunately the regulator seems to side with insistent clients to an extreme effect and that has scared away many IFAs from this area and the ones that are left are reluctant to take on cases without high payments.", you say it is not unfortunate that you are allowed to exercise your rights and he should accept the law. But that is not the contention and we don't deny the laws and regulations which exist. The contention it that it is unfortunate that the regulator's extreme stance has polarised the market; people provide the service expensively, or don't provide it at all. It has led to extreme pricing and lack of availability of the service.

Is that unfortunate, or fortunate, for people like the OP or yourself last year, seeking an affordable service?

"That is a lucid, intelligent, well thought out objection.... Overruled"

[Deleted User]

dmelife wrote: »

Why are you all wasting time trying to educate ZPZ. He doesn’t get it and he never will.

Are you the one who stated that I would soon be bankrupt, back along?

Nice sentiment, dmelife, but you'll have to be very patient.

dmelife

Probably, that does sound like something I’d say.

Are you the one who said you make all your investment decisions based on the companies name?

��

Suemac2a

AnotherJoe wrote: »

Not financial, situational.

According to what you've posted, you believe that its a few hours work with no real downside, no high costs for the IFA, and because of that you think the costs are unfair and the IFA gets far too much, Is that a fair summary?

So why is it do you think that more than 90% of IFAs dont even get as far as charging a high fee for this, they dont even wish to do it ?

Surely if it was such a boondoggle, they'd be all over it?

I think that is a pretty harsh interpretation. Firstly my comment above was a lighthearted one to excuse my schoolboy error of conflating tens of thousands with a five figure sum.

In terms of what I have actually posted, I came on here in good faith and with an open mind to ask a perfectly sensible question of what is a reasonable fee for the requisite db transfer process, prior to meeting with IFAs.

I did not quantify the work required, I did not know, so I asked. Other posters pointed to sources suggesting the transfer analysis should be x hours work and y hours fee. As this does not match with various IFA website quotations and 3% of CETV seems a standard 'guide' of course I was interested to understand the reasons for the apparent mismatch, and whether additional services like ongoing management fees were inevitable.

Please remember I am a consumer and potential IFA client who, like many others is/was completely unaware of the prevailing industry issues.

I have no beef with the profession per se. From this forum thread alone it seems clear that IFAs are in a very difficult position. But I do absolutely take issue with the justification that 3% of the pot is a reasonable amount simply because its a 'drop in the ocean' in relation to the CETV and possible gains/losses of this pot over time. Quite apart from the fact that a transfer of a 700k pot would equate to a £1k per hour fee (unless you argue with that calculation), and that this 'drop in the ocean' is currently MY drop in the ocean that I have a duty of care not to squander needlessly, this is an entirely specious and frustrating argument. The more honest answer would be that indemnity premiums and risk are making the work extremely unattractive/unprofitable and IFAs are charging accordingly. That I understand, but does not make the cost, for what after all is a mandatory requirement, either fair or reasonable to the consumer.

It all sounds a bit of a mess but I do not think the solution to that is for anyone to gaslight the consumer by implying their incredulity is entirely missplaced, naive or cheapskate.

I remain grateful that this thread has been informative and quite eye-opening. Again, I thank everyone for their contributions.

dmelife

It is not 7 hours work. Try 3 or 4 x 2hr meetings, plus 15hrs in the office, plus outsourced compliance file check £500-£1000, plus £10k per annum extra PI premium for the rest of your career with a £15k excess, plus higher capital adequacy requirement plus FACS levy plus plus plus.

cloud_dog

Suemac2a wrote: »

I think that is a pretty harsh interpretation. Firstly my comment above was a lighthearted one to excuse my schoolboy error of conflating tens of thousands with a five figure sum.

In terms of what I have actually posted, I came on here in good faith and with an open mind to ask a perfectly sensible question of what is a reasonable fee for the requisite db transfer process, prior to meeting with IFAs.

I did not quantify the work required, I did not know, so I asked. Other posters pointed to sources suggesting the transfer analysis should be x hours work and y hours fee. As this does not match with various IFA website quotations and 3% of CETV seems a standard 'guide' of course I was interested to understand the reasons for the apparent mismatch, and whether additional services like ongoing management fees were inevitable.

Please remember I am a consumer and potential IFA client who, like many others is/was completely unaware of the prevailing industry issues.

I have no beef with the profession per se. From this forum thread alone it seems clear that IFAs are in a very difficult position. But I do absolutely take issue with the justification that 3% of the pot is a reasonable amount simply because its a 'drop in the ocean' in relation to the CETV and possible gains/losses of this pot over time. Quite apart from the fact that a transfer of a 700k pot would equate to a £1k per hour fee (unless you argue with that calculation), and that this 'drop in the ocean' is currently MY drop in the ocean that I have a duty of care not to squander needlessly, this is an entirely specious and frustrating argument. The more honest answer would be that indemnity premiums and risk are making the work extremely unattractive/unprofitable and IFAs are charging accordingly. That I understand, but does not make the cost, for what after all is a mandatory requirement, either fair or reasonable to the consumer.

It all sounds a bit of a mess but I do not think the solution to that is for anyone to gaslight the consumer by implying their incredulity is entirely missplaced, naive or cheapskate.

I remain grateful that this thread has been informative and quite eye-opening. Again, I thank everyone for their contributions.

But this based on your perspective of what you consider "fair", one that you have little to use as a reference point. Obviously, the quoters feel this is fair to undertake this high risk transaction. You simply need to find a pension specialist that equates the same level of risk with the same level of renumeration as you do.

Suemac2a

cloud_dog wrote: »

But this based on your perspective of what you consider "fair", one that you have little to use as a reference point. Obviously, the quoters feel this is fair to undertake this high risk transaction. You simply need to find a pension specialist that equates the same level of risk with the same level of renumeration as you do.

Gaaah. Its not my perspective, its the FCAs.

AnotherJoe

Suemac2a wrote: »

I have no beef with the profession per se. From this forum thread alone it seems clear that IFAs are in a very difficult position. But I do absolutely take issue with the justification that 3% of the pot is a reasonable amount simply because its a 'drop in the ocean' in relation to the CETV and possible gains/losses of this pot over time. Quite apart from the fact that a transfer of a 700k pot would equate to a £1k per hour fee (unless you argue with that calculation),


They arent charging on a per hour basis and so equating it to a per hour basis makes no sense.
They are charging on the basis of liability and that liability IS related to the size of the transfer.
A £400k transfer has twice as much liability as a £200k one. They both probably have exactly the same amount of work and so you are complaining that the adviser doing the second transfer is charging 2x as much "per hour". But the charge isnt for the hours, (even if she has to state it like that), its almost entirely for the liabilty (which remember could go 30-40 years into the future)


and that this 'drop in the ocean' is currently MY drop in the ocean that I have a duty of care not to squander needlessly, this is an entirely specious and frustrating argument. The more honest answer would be that indemnity premiums and risk are making the work extremely unattractive/unprofitable and IFAs are charging accordingly.

Like I and others have said and you can surely clearly see.



That I understand, but does not make the cost, for what after all is a mandatory requirement, either fair or reasonable to the consumer.

Well, tough, it is what it is. Take it up with the regulator whose unintended consequence of stronger consumer protection has been to raise prices for consumers.

Look at all those irritating cookie agreements we have to click like damn monkeys on every website. Well that was the unintended consequence of some meddling bureaucrat who thought we should all be informed about what was happening re cookies. I bet the average consumer is no more informed that previously.


It all sounds a bit of a mess but I do not think the solution to that is for anyone to gaslight the consumer by implying their incredulity is entirely missplaced, naive or cheapskate.
Your incredulity was definitely naive. maybe less so now when you contemplate why it is so few IFAs want to do this easy work fora tenner and a packet of chips?


I remain grateful that this thread has been informative and quite eye-opening. Again, I thank everyone for their contributions.

Thanks for the thanks and in closing, yep the £10k or whatever it was IS a lot of money though perhaps not over 30 years, but that fee is effectively determined by the regulator.
However, fundamentally, I'm still not sure you've taken on the fact that £10k in the context of managing £800k is indeed chicken feed.


I don't know what I'm up today, I thought I'd be down, maybe at a guess £50k up, but heck i could be down £100k tomorrow. If £10k fakes you out so much you arent psychologically ready to be managing that amount of money (was it £800k x 2?).

bowlhead99

ZingPowZing wrote: »

You mean the FO's case studies page? I don't see any systematic, wholesale bias towards the consumer there. This is from the first one to come up under "pensions":

The case studies page is where they give you a quick precis of a case they resolved where the case was mostly clear cut and people would think 'yeah, the FOS was right to conclude that'. It is basically marketing about the good work that they would like people to think they do.

If an FOS worker was on here and defended an accusation of producing unwelcome outcomes by saying, "but look at our case studies! We make smart and impartial decisions in the best interests of both consumers and the industry!"...

...Were you to treat their response with the same robust scepticism that you treat financial advisers and investment managers, you would perhaps reply along the lines of, "well thanks for that hand picked self serving marketing guff, it sounds fine and dandy, but that's not a representative sample of the actual cases that we hear about in the published decisions or anecdotally from people making or receiving complaints".

xylophone posted a quote above from the FCA saying "We expect advisers to start from the position that a pension transfer is not suitable". You can also see the same in a roundtable discussion in Ombudsman news just over a year ago, where the Acting Markets and Wholesale Policy Director at the FCA noted:

Although pension freedoms have offered more options to consumers, we have maintained our guidance that an adviser should start from the assumption that a transfer will be unsuitable and that for most people, retaining their defined benefit pension is likely to be in their best interests. While transfers will be suitable for some, there is a risk of considerable consumer detriment in this area. We have therefore increasingly focused our attention on making sure that people who are considering transferring their money out of a DB pension pot get the right advice.

When insurers hear that the FCA start point is that an advised transfer away from a package of defined benefits will be unsuitable; that for most it's best to keep what you have; there's a considerable risk of consumer detriment from carrying out transfers... they know the FCA and ombudsmen will be scrutinizing the results and potentially coming down like a ton of bricks against people who can't justify why they helped a transfer to happen.

The insight into what the FCA say is a hot topic carrying considerable risk of consumer detriment is a major driver of high premiums for people engaged in that sort of work.

The language "...increasingly focused our attention... making sure people get the right advice" is code for, "we are all over this and if we start from the position you shouldn't be doing it and you do it and the customer is harmed, you WILL be paying out for it".

Insurers do not like to hear that, whether it's literally word-for-word or merely something that they can infer from the ombudsman's attitude to previous pet topics.

[Deleted User]

https://www.financial-ombudsman.org.uk/data-insight/ombudsman-decisions/SearchDecisions?Keyword=DB+pension+transfer&BusinessID=&IndustrySectorID=&DateFrom=2018-01-01&DateTo=2020-02-03&Url=&Comment=&SecurityID=b66ac7ba77e1df71627f7e726e9e8065625f69ad&Captcha=&Captcha_Timestamp=1580757624&start=30

This is a record of the Financial Ombudsman's history of decisions relating to the last two years of pension transfers. Please show me the cases where the FO has upheld a complaint after the adviser recommended not to transfer.