DB Pension transfer - IFA costs

Suemac2a

AnotherJoe wrote: »

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?).

Crikey, so many insults for someone trying to be an informed client and understand the IFA position. I have certainly taken on the fact that you are unnecessarily rude. 😀

AnotherJoe

Suemac2a wrote: »

Crikey, so many insults for someone trying to be an informed client and understand the IFA position. I have certainly taken on the fact that you are unnecessarily rude. 😀

What was rude?? It was meant to be factual. As in, I dont think you are ready to be managing £800k (or is it £1.6M?) if you get so excised over £10k when thats the going rate.

And i certainly think its very reasonable to point out you were naive to expect the work to be charged for on the basis of time spent rather than market forces because all those shares/funds you'll be managing are priced according to market forces.



Here's an old story that sort of fits.
A boilermaker was hired to fix a huge steamship boiler system that was not working well. After listening to the engineer’s description of the problems and asking a few questions, he went to the boiler room. He looked at the maze of twisting pipes, listened to the thump of the boiler and the hiss of the escaping steam for a few minutes, and felt some pipes with his hands. Then he hummed softly to himself, reached into his overalls and took out a small hammer, and tapped a bright red valve one time. Immediately, the entire system began working perfectly, and the boilermaker went home.
When the steamship owner received a bill for one thousand dollars, he became outraged and complained that the boilermaker had only been in the engine room for fifteen minutes and requested an itemized bill. So the boilermaker sent him a bill that reads as follows:
For tapping the valve: $.50
For knowing where to tap: $999.50
TOTAL: $1,000.00”

Suemac2a

Absolute last word from me.

When the FCA states publicly "providing db transfer advice should not cost more than £3,500.....this included between 20-25 hours work.....the typical 'market charge rate' for a pension transfer specialist is around £200 per hour.......firms should be able to negotiate good pi` renewal rates......'

Yet AnotherJoe says 'they are not charging on an hourly rate and to equate this makes no sense......the charge isnt for the hours (even if she has to state it like that) it is almost entirely for the liability"

Do you at least concede that potential clients simply trying to do due diligence and establish the truth of the matter (what constitutes a reasonable fee) are likely to be somewhat confused? Theirs not to reason why?

bowlhead99

ZingPowZing wrote: »

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.

Ok, here's one with a provisional and final decision issued in the second quarter of last year.

https://www.financial-ombudsman.org.uk/files/235049/DRN6007688.pdf

That is an example of a case where Mr D was a person with an executive pension plan and a high level of investment income in relation to his salary (so presumably had reached management level in his career, owned investments and had some sense about him) and a few other pension schemes including two DB schemes.

He wanted to invest in an offshore investment property which was a high risk scheme. He was described as having an ultra-speculative attitude to investment risk. He had already committed to buy the investment property, so was pretty much going to go ahead with the transfer whether the advice was to do it or not, even though he did not have experience of investing in unregulated funds. The adviser recognised that the transfer of the safe pensions with high critical yield and the subsequent investment was one which not even an ultra-speculative investor would entertain.

They explained that by buying a single commercial property asset situated offshore, he would lose the control he would have in UK investments and that placing a large percentage of his accrued retirement provision into a single high risk asset would be unduly optimistic, and strongly advised against it. They recommended that he didn't transfer out of his DB schemes and that he didn't invest his DC money in it either. He said he appreciated the advice but would like to continue to establish the SIPP. They reiterated the advice.

They had consulted the then FSA and been advised they were only responsible for their advice and not whether clients take it, and noted that later clarification from the FCA on insistent clients said that the adviser can arrange things for insistent clients if they wish as long as they highlight the risk of the client's proposed actions. They told him it could result in total loss but he still wanted to do it. Ultimately, he used them to arrange a transfer into a SIPP, from which he acquired the property on an execution only basis, and then the development went bust and he lost the lot.

The Ombudsman considered it. He noted that the advisor recognised that the transfers and investments were not suitable and could result in the loss of the whole pension which would be disastrous for him. The Ombudsman agreed with the advice they gave him. He noted that they recognised that accepting this sort of business was risky and that they had sought comment from the call handler at the FSA per the notes on their files.

So, a slam dunk for the adviser right? No way they are guilty of anything. They told him not to do it, he replied to their advice to say he appreciated it but wanted to do it, they told him again it was a bad idea. They helped him achieve the transfer to a SIPP and then he went and bought a stupid investment which they had already told him he shouldn't do. The ombudsman agreed they had told him not to do it and only facilitated the transfer because he was dead set on doing it against advice and knew the consequences.

Let's read on to see what happened.

The ombudsman cited the general FCA principles in the conduct of business sourcebook: the client's best interests rule. Which says that a firm must act honestly, fairly and professionally in accordance with the best interests of the client. There was a moral dilemma.

The moral dilemma was about acting in the client's best interests. Ombudsman accepted that they advised against the transfer. But they took money for providing the service even though it would have left him in a likely worse position. If it was acting in the best interests of its client it should have refused to process the transfer. The transaction wouldn't have happened without their involvement in it. They realised the investments were unsuitable even though all they were doing was helping with the first stage of putting money into the SIPP and leaving him to it.

Therefore THEY exposed his pension fund to significant risk. He wouldn't have invested if they hadn't have let him.

What is their punishment for helping him achieve the objective he wanted and taking a fee (noting that people on here say you should be able to get DB transfer advice with s contingent fee)?

Well, among other things:
Calculate the value of his DC and DB schemes if they hadn't been transferred to the SIPP. The DC ones would have grown in line with a stock market total return index. The DB ones should be valued in line with financial assumptions as of 2019 rather than 2011 when it actually happened (so using current ultra-low yields with high transfer values rather than historic rates that produced a lower valuation at the time he wanted to cash it in).

Pay a commercial value to acquire the failed property investment from his SIPP. If impractical because it's really worthless/ impossible to transact, assume £nil.

Then after using their own money to buy off the property for a commercial price or £nil, make good any losses between what the pension is now worth and what his pensions would have grown to without the transfers and the stupid investment he insisted on making.

Pay his next 5 years SIPP fees because he wouldn't have needed high SIPP fees if he had kept his workplace DC and DC schemes where they were.

Pay him £250 for 'distress and inconvenience'.

If you are ZPZ, you think it's unfair that you have to pay £5k+ for an insistent transfer.

If you are the adviser, you think it's unfair that you should be painted as the bad guy for charging a fee to handle an insistent transfer that you disagree with when the regulator only last year was making advice firms pay literally hundreds of thousands of pounds of compensation when the advice is sound but they are seen to help a client get an investment he couldn't have got if they didn't help.

The icing on the cake is the £250. The client was distressed because he lost his money through his own stupid investment idea. The client lied to get the case in front of the FOS. The advisor would pay £550 for having the FOS take the case. The FOS agrees that the client was lying about not being told it was high risk because there is documentation everywhere. Basically if it was a court of law, the client would have perjured himself. But the FOS says the client only did something dumb because he wanted to and was allowed to. So the adviser is at fault and should pay the investor for the 'distress and inconvenience'

FOS? !!!!!!!

[Deleted User]

bowlhead99 wrote: »

Ok, here's one with a provisional and final decision issued in the second quarter of last year.

https://www.financial-ombudsman.org.uk/files/235049/DRN6007688.pdf

That is an example of a case where Mr D was a person with an executive pension plan and a high level of investment income in relation to his salary (so presumably had reached management level in his career, owned investments and had some sense about him) and a few other pension schemes including two DB schemes.

He wanted to invest in an offshore investment property which was a high risk scheme. He was described as having an ultra-speculative attitude to investment risk. He had already committed to buy the investment property, so was pretty much going to go ahead with the transfer whether the advice was to do it or not, even though he did not have experience of investing in unregulated funds. The adviser recognised that the transfer of the safe pensions with high critical yield and the subsequent investment was one which not even an ultra-speculative investor would entertain.

They explained that by buying a single commercial property asset situated offshore, he would lose the control he would have in UK investments and that placing a large percentage of his accrued retirement provision into a single high risk asset would be unduly optimistic, and strongly advised against it. They recommended that he didn't transfer out of his DB schemes and that he didn't invest his DC money in it either. He said he appreciated the advice but would like to continue to establish the SIPP. They reiterated the advice.

They had consulted the then FSA and been advised they were only responsible for their advice and not whether clients take it, and noted that later clarification from the FCA on insistent clients said that the adviser can arrange things for insistent clients if they wish as long as they highlight the risk of the client's proposed actions. They told him it could result in total loss but he still wanted to do it. Ultimately, he used them to arrange a transfer into a SIPP, from which he acquired the property on an execution only basis, and then the development went bust and he lost the lot.

The Ombudsman considered it. He noted that the advisor recognised that the transfers and investments were not suitable and could result in the loss of the whole pension which would be disastrous for him. The Ombudsman agreed with the advice they gave him. He noted that they recognised that accepting this sort of business and that they had sought comment from the call handler at the FSA per the notes on their files.

So, a slam dunk for the adviser right? No way they are guilty of anything. They told him not to do it, he replied to their advice to say he appreciated it but wanted to do it, they told him again it was a bad idea. They helped him achieve the transfer to a SIPP and then he went and bought a stupid investment which they had already told him he shouldn't do. The ombudsman agreed they had told him not to do it and only facilitated the transfer because he was dead set on doing it against advice and knew the consequences.

Let's read on to see what happened.

The ombudsman cited the general FCA principles in the conduct of business sourcebook: the client's best interests rule. Which says that a firm must act honestly, fairly and professionally in accordance with the best interests of the client. There was a moral dilemma.

The moral dilemma was about acting in the client's best interests. Ombudsman accepted that they advised against the transfer. But they took money for providing the service even though it would have left him in a likely worse position. If it was acting in the best interests of its client it should have refused to process the transfer. The transaction wouldn't have happened without their involvement in it. They realised the investments were unsuitable even though all they were doing was helping with the first stage of putting money into the SIPP and leaving him to it.

Therefore THEY exposed his pension fund to significant risk. He wouldn't have invested if they hadn't have let him.

What is their punishment for helping him achieve the objective he wanted and taking a fee (noting that people on here say you should be able to get DB transfer advice with s contingent fee)?

Well, among other things:
Calculate the value of his DC and DB schemes if they hadn't been transferred to the SIPP. The DC ones would have grown in line with a stock market total return index. The DB ones should be valued in line with financial assumptions as of 2019 rather than 2011 when it actually happened (so using current ultra-low yields rather than historic rates that produced a lower valuation at the time).

Pay a commercial value to acquire the failed property investment from his SIPP. If impractical because it's really worthless/ impossible to transact, assume £nil.

Then after using their own money to buy off the property for a commercial price or £nil, make good any losses between what the pension is now worth and what his pensions would have grown to without the transfers and the stupid investment he insisted on making.

Pay his next 5 years SIPP fees because he wouldn't have needed high SIPP fees if he had kept his workplace DC and DC schemes where they were.

Pay him £250 for 'distress and inconvenience'.

If you are ZPZ, you think it's unfair that you have to pay £5k+ for an insistent transfer.

If you are the adviser, you think it's unfair that you should be painted as the bad guy for charging a fee to handle an insistent transfer that you disagree with when the regulator only last year was making advice firms pay literally hundreds of thousands of pounds of compensation when the advice is sound but they are seen to help a client get an investment he couldn't have got if they didn't help.

The icing on the cake is the £250. The client was distressed because he lost his money through his own stupid investment idea. The client lied to get the case in front of the FOS. The advisor would pay £550 for having the FOS take the case. The FOS agrees that the client was lying about not being told it was high risk because there is documentation everywhere. Basically if it was a court of law, the client would have perjured himself. But the FOS says the client only did something dumb because he wanted to and was allowed to. So the adviser is at fault and should pay the investor for the 'distress and inconvenience'

FOS? !!!!!!!

Well, I read halfway through the first line :
"Mr D was advised to transfer into a SIPP.."

Where are the cases found against an adviser who recommended not to transfer?

bowlhead99

Suemac2a wrote: »

Do you at least concede that potential clients simply trying to do due diligence and establish the truth of the matter (what constitutes a reasonable fee) are likely to be somewhat confused? Theirs not to reason why?

FWIW I certainly agree that point. You are only trying to do a fact find to work out what it could or should cost to implement your plan. £50k is overkill if that is what you are hearing. £10k would not be, given the risks of you going ahead with a bad plan and losing money due to your own fault even if the advisor doesn't think you should do it.

The advisor in looking at it might come up with a great plan and a positive recommendation and it might look similar to your own plan, or it might look different. When he engages with you before running the numbers he doesn't know what the ultimate advice will definitely be. It might be negative and you might turn out to be a nightmare client if he helps you do something that ends up going titsup.

You know you are not the sort of person who will blame the adviser for helping with a transfer if it goes wrong and you fall on hard times. ZPZ knows that in his own case too. However, the adviser does not know how you and ZPZ will ultimately fare and whether you will be back to complain despite being very nice people at the time of the advice. He knows what can happen to advisers who advise on pension transfers that allow clients to achieve bad outcomes, as he has read the FOS decision I posted above. So, he prices accordingly.

By prices accordingly, I mean he gives you a price that he knows is more than the man hours of work but gives him money towards his insurance premiums on the high value transfer for years to come. If the price is sky high he really doesn't want you to accept it because he would rather not have the work and the liability. He is trying to price himself out of the market - letting you down gently rather than giving a tempting low price which would make you think, heck it's only a day's market movements, I'll go for it.

bowlhead99

ZingPowZing wrote: »

Well, I read halfway through the first line :
"Mr D was advised to transfer into a SIPP.."

Where are the cases found against an adviser who recommended not to transfer?

Thanks for disrespecting my motives and letting me waste my time explaining what happened in that case in the hope that it would save you time and effort doing the research yourself.

That *IS* example of a case against an adviser who recommended not to transfer

The client's complaint was that he was recommended to transfer. It was a frivolous complaint, because the client wanted some free money to compensate him for his own stupidity in losing his pensions.

The facts were that he was recommended NOT to transfer.

The Ombudsman agreed that the client had been recommended against transferring and that it was correct to advise against it.

The adviser let the client proceed on an insistent basis because the client really wanted to do it despite the advice. Ombudsman made the adviser compensate the investor anyway because reasons.

Please, don't stop reading after the first sentence. Read my commentary in the post above and perhaps the case itself and you will understand more of the points we are trying to make in this thread

Thanks

AnotherJoe

Suemac2a wrote: »

Absolute last word from me.

When the FCA states publicly "providing db transfer advice should not cost more than £3,500.....this included between 20-25 hours work.....the typical 'market charge rate' for a pension transfer specialist is around £200 per hour.......firms should be able to negotiate good pi` renewal rates......'


The FCA is full of BS. They dont live in the real world. maybe thats what they'd like to believe but their own evidence and knowledge of current fees and IFA's bailing out of advice and insurance fees rising 5x and your experience should have made it clear that statement is total BS.



Yet AnotherJoe says 'they are not charging on an hourly rate and to equate this makes no sense......the charge isnt for the hours (even if she has to state it like that) it is almost entirely for the liability"


As I wrote, the FCA is full of BS etc.



Do you at least concede that potential clients simply trying to do due diligence and establish the truth of the matter (what constitutes a reasonable fee) are likely to be somewhat confused? Theirs not to reason why?

Yes I do agree.

jimi_man

ZingPowZing wrote: »

Well, I read halfway through the first line :
"Mr D was advised to transfer into a SIPP.."

Where are the cases found against an adviser who recommended not to transfer?

Slight lack of attention to detail. When you read into it, it does explain it quite well. Maybe a little more perseverance

jimi_man

Suemac2a wrote: »

Crikey, so many insults for someone trying to be an informed client and understand the IFA position. I have certainly taken on the fact that you are unnecessarily rude. 😀

Maybe a little oversensitive? I read it a number of times and couldn't find anything particularly insulting. Calling someone a w**ker that someone did earlier (apologised so no harm done) is an insult, but not this.