DB Pension transfer - IFA costs

eskbanker

ZingPowZing wrote: »

No, you're quite right. No excuse.

General apology to the forum and a personal one to eskbanker, whom I don't know from Adam, for a post that literally made no sense but was, nonetheless, rash and unkind.

Delighted that you agree that sarcasm is sometimes appropriate on here....

bowlhead99

ZingPowZing wrote: »

The regulator is not "siding" with a client who insists on transferring a pension, it is upholding the law. It can do no other. Therefore it neither fortunate or unfortunate.

When the client has insisted on transferring their pension, and later comes back to the adviser with a formal complaint that they did not fully understand that they could have faced the unwelcome outcome of losing or running out of money as a consequence of transferring their protected or guaranteed benefits, and want to be compensated for the losses they incurred as a consequence of the adviser facilitating their transfer...

...the client will be probably be willing to say as part of the complaint whatever they think it will take to move the adviser to pay out, or whatever will convince the ombudsman that they did not understand they could have been made worse off, as they are a mere mortal without experience of these financial products, and it is shocking how they were treated by the industry and now their life savings is gone.

They will say that they assumed the adviser was just covering his backside when he produced whatever documentation was signed off, so they didn't fully read or understand it they just signed it; part of the reason they thought that their actions were fine is that the adviser filled out the forms for the receiving scheme to help the transfer complete.

The client will say that if the adviser was *really* against it, he wouldn't have filled out the forms and let it happen, so the fact that he did let it happen means he didn't really disapprove. And if a regulated financial professional with years of experience doesn't really disapprove (just makes some token gesture like producing an advice report against it, while still supporting the process), it was probably not such a bad idea to do the transfer really.

And now the money is gone, and it was all the fault of the adviser who helped it on its way, because if the adviser didn't help, the money would still be safe in a DB scheme.

That is what the advisers are fearing happening. The lifetime liability for an idiot customer (or a very smart customer playing dumb because he has ££ symbols behind the eyes and wants a way out of his mess). This risk causes unwelcome extortionate insurance premiums for years after the invoice for advice was raised by the adviser.


You say the regulator has no choice but to uphold the law. But really if there is a question on how someone has lost all their money following a DB transfer there are three choices;

The regulator/ ombudsman when faced with that frivolous complaint *could* start from a position that the advisor who took on the insistent client and let the client proceed against advice is most likely in the right, and innocent until proven guilty. Siding with the advisor. After all, the advisor likely has paperwork which proves their own case, not guilty m'lud, tried to talk him out of transferring and he insisted, not my fault or responsibility. The customer would have to work really hard to show that there is a case to answer, and that the customer should win such a case in spite of the fact that the adviser told him not to do what he did. That way lies cheap insurance premiums.

Or he could start from a position of sitting on the fence, saying there isn't a presumption of guilty or innocence on either side and both most prove their relative case, which the ombudsman will judge impartially. That way lies medium insurance premiums.

What he actually does is start from a position of siding with the consumer. That the consumer's case for compensation after blowing his DB transfer windfall is very strong because advisers should know better than to help them do something that could result in expensive mistakes. That even if the adviser has reams of documentation showing that the client was recommended NOT to do it, and the client had read and apparently understood the advice, and said he would never come back to complain about it because we all know the client deliberately overrode the advice at his own risk... the adviser is still likely guilty of damaging the client's wealth, just by being a party to the transaction by letting his name appear on it somewhere (even though he was only there to say 'stop don't do it').

That way lies expensive insurance premiums. The result of the 'independent' arbiter being on the consumer's side when interpreting regulations and conduct of business rules, is high advisory fees to cover those high premiums.

The regulator does have a choice on what he does. Side with customer to defend him against bad advisors ; side with advisor to defend him against lying or incompetent consumers ; approach each case on its merits from a position of neutrality.

The regulator has said he does not approach each complaint against a firm from a position of neutrality, but from a position that the DB transfer is generally a bad thing to let happen and that if it happens and goes wrong an advice firm could/ should / would be on the hook for the consequences.

The fact that the regulator is not neutral but is siding with the consumer, makes genuine post-advice complaints easier for consumers to get through and win compensation. It also makes non genuine complaints easier to get through and won compensation because the consumer just needs to play dumb and he can get a payout.

The consumers having a consumer champion in their corner who can help them get a payout from an advice firm after the consumer proceeded with a transfer against advice and lost their money, means the advice firms have huge expenses for with insurance premiums or for putting money away to cover the downside risk. This means they need to charge a lot for the work, or not take on the work

As such, the regulator's attitude is why nobody will sell you DB transfer advice for low cost, if they will do it at all. The (expensive) state of the market is a consequence of the regulator trying to protect consumers above and beyond the call of duty, rather than approaching complaints from a position of neutrality. The consequence of a nanny state that tries to protect customers from themselves is the high price billed to consumers who want to exercise their 'freedom' to buy advice and then transfer.

[Deleted User]

bowlhead99 wrote: »

The fact that the regulator is not neutral but is siding with the consumer,

Link to cases please.

Also, what proportion do these cases represent? About half a million people have transferred DB pensions.How many have been compensated? How many are looking for compensation?

"the consumer just needs to play dumb and he can get a payout." - I assume bowlhead can back up this wild assertion.


You're framing the problem in terms of impartial advisers operating under a biased regulator.
That deserves a mention in the inventory of self-serving posts.

[Deleted User]

As for the regulator itself being responsible for excessive fees:

https://citywire.co.uk/wealth-manager/news/fca-to-clamp-down-on-expensive-and-conflicted-ongoing-advice-fees/a1254558

xylophone

About half a million people have transferred DB pensions.How many have been compensated?

But even if none had, the risk of a claim for compensation still remains and the firms' insurers will factor this in when setting the premium.

You're framing the problem in terms of impartial advisers operating under a biased regulator.
That deserves a mention in the inventory of self-serving posts.

Why "self serving"?

https://www.fca.org.uk/publications/multi-firm-reviews/key-findings-our-recent-work-pension-transfer-advice

We expect advisers to start from the position that a pension transfer is not suitable, but that there are occasions when it is in the client’s best interests to transfer. We also saw instances where firms had advised a member to retain their benefits when it would have been suitable to transfer them.

When the insurers see the words underlined above, a premium is set accordingly?

JoeCrystal

ZingPowZing wrote: »

Link to cases please.

"the consumer just needs to play dumb and he can get a payout." - I assume bowlhead can back up this wild assertion.

There is a database of all the decisions taken. When I got some spare time, I will see if I can get some numbers.

The most recent decision held up against the adviser on a DB pension as fat as I can see was because ince he didn't expect his SIPP of half of the million pounds from his DB pension scheme to fall in value and thought it will always grow. It fell by 10k and that was enough to start the ball rolling.

[Deleted User]

JoeCrystal wrote: »

There is a database of all the decisions taken. When I got some spare time, I will see if I can get some numbers.

The most recent decision held up against the adviser on a DB pension as fat as I can see was because ince he didn't expect his SIPP of half of the million pounds from his DB pension scheme to fall in value and thought it will always grow. It fell by 10k and that was enough to start the ball rolling.

You may be busy JoeCrystal. Just post a link and I'll have a look.

dmelife

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

bowlhead99

ZingPowZing wrote: »

You're framing the problem in terms of impartial advisers operating under a biased regulator.

That deserves a mention in the inventory of self-serving posts.

The advisers take account of what they think the regulator wants them to do. That's what regulatory compliance is all about.

The ombudsman has telegraphed certain outcomes (i.e. they will start from the position that investors are generally best to keep the guaranteed/ safeguarded/ defined benefits, but by exception, may not be). Which is why advisers are worried that if they deliver other outcomes - e.g. facilitate transfers without having documentation up the wazooh that shows the transfer is a good idea, or facilitate transfers when they don't believe it to be a good idea and have recommended against it - they will be up against a wall of pain and potential liability.

Separately, the regulator has produced high level commentary saying the costs of advice might be higher than they need to be. The advisers' retort would be that if they are to advise on transactions that the regulator perceives to be high risk, they will need to charge a lot for it to (a) ensure they can afford to compensate clients if one of these high risk things goes wrong and (b) employ the right people and bring their extensive experience to bear and ensure their advisory business is delivering the right outcomes especially in areas where it's accepted that the transactions are higher risk.

ZingPowZing wrote: »

You may be busy JoeCrystal. Just post a link and I'll have a look.

If you go back to your own thread a few months back you may remember someone linking your case (and some other case speculating that maybe it was yours). That might give you a pointer to where things are published.

[Deleted User]

bowlhead99 wrote: »

If you go back to your own thread a few months back you may remember someone linking your case (and some other case speculating that maybe it was yours). That might give you a pointer to where things are published.

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":
"We saw that, at the time of the IFA’s advice, none of the guaranteed annuity rates offered by Amir’s original policies were competitive compared to those available in the wider annuity market. We also took into account Amir’s circumstances and attitude to risk at the time of the advice. Based on this, we decided that even if he’d been advised not to transfer on the basis of the potential future advantages of the GARs, Amir would have preferred to transfer out because of the opportunity of obtaining better returns in the new pension plans. We didn’t uphold his complaint."

According to a freedom of information request by consultancy firm Duff & Phelps, the Fos received 798 complaints relating to pension transfers during 2018/19, of which 39 per cent were upheld. That is not a strikingly big number considering the overall volume of DB transfers, and the subset of complaints upheld against advice not to transfer must be..well, you tell me the figure, bowlhead.