Adviser fined £1.3m after pension transfer failures

[Deleted User]

jamesd said:

Deleted_User said:

In this particular case the firm and the advisor screwed up. I do think the individuals receiving the advice bear a lot  of responsibility.  Its their money.  Did they do due diligence on the firm? Did they understand how the advisor was paid and incentivized? Did they research the issues so they can ask the right questions?  Did they read and understand what was given to them? Did they look at a range of opinions? 

There's a vital question:

were the clients sufficiently capable to make those assessments?

In many cases I expect that the answer will be no, particularly in innumerate and also low IQ segments of a customer base. Part of the purpose of professionalisation of advice is to protect such clients.

Today, assuming you are healthy, there is no excuse for being innumerate. And if one is mentally challenged he should have supervision.  Its the eternal question of how far the state should go to try and protect all people from themselves. Regulations pile up but I doubt we’ll ever get there.  The more we try, the more people think someone else is responsible and the less care they take in making key decisions. 

Secret2ndAccount

I would like to compare my dentist with my sister’s IFA. I don’t use an IFA, but I have power of attorney for my sister. She had been using the IFA for years, and he was managing all her investments. I saw no reason to go counter to her wishes on day one, so I kept him on.

I put the basic 2880 into her SIPP. Six months later (new financial year) I went back to put another 2880 in. IFA’s first reply was “Do you have PofA?”. Obviously he didn’t remember – that’s fair enough. Either his note-taking was so poor he hadn’t updated his records, or he was lazy enough that it felt easier to ask me, and it didn’t bother him to let me see that. My dentist is always up to speed when I see him. Either he remembers me or he reads my notes before I arrive.

50% of the time when I contact the IFA I get a message back the same day, but it says that he is on holiday and will get back to me in 1 or 2 weeks. My dentist is clearly more intelligent; clearly harder working (I can see him on a Saturday). The amount of work to qualify as a dentist is substantially higher than for an IFA. Both have to carry a large liability policy, and be prepared to answer to their legislating body if there is a problem.

My dentist offers cosmetic procedures. He also teaches others about cosmetic dentistry and has presented several papers at international conferences. In spite of this, he makes time to see NHS patients too. If somebody really needs a dentist, he will make sure they get treatment whether they can afford it or not. The IFA won’t work with you unless he makes minimum 2.5k per year. He charges a percentage, but the 2.5k is there in the contract. So if he screws up and your investments go to zero, you will still owe him 2.5k. He did have my sister in Woodford’s property fund. I told him I thought we should get out, but he said these things always go up and down. Fortunately this wasn’t her only fund. Of course, the fees still keep on rolling. My dentist has never really made any mistakes with me. On one occasion he started prepping for a crown, and realized that a crown wasn’t going to work well, so he turned it into an implant procedure and charged me the agreed fee for the crown, which was about half what the implant would have been. The equivalent for the IFA would have been to say “I really screwed you over with the Woodford thing. I will refund my charges for the last two years for the original value of the Woodford fund”. Some chance of that.

My dentist is by no means poor, but he’s just making a living. No fast cars or long holidays for him. The IFA has a detached house with a wall around it and an electric gate. Inside the walls there is a separate office building, plus 6 cars and a trophy wife.

I have been lucky enough to have an interesting job all my life. If I get reincarnated and am not so fortunate next time around, I shall become an IFA. I have yet to find a job with a better ratio of pay vs work vs talent. Anyone with the ability and the work ethic to become a dentist is, in my opinion, making a mistake if they study to become a dentist when they could be an IFA instead.

HappyHarry

Secret2ndAccount said:

I would like to compare my dentist with my sister’s IFA. I don’t use an IFA, but I have power of attorney for my sister. She had been using the IFA for years, and he was managing all her investments. I saw no reason to go counter to her wishes on day one, so I kept him on.

I put the basic 2880 into her SIPP. Six months later (new financial year) I went back to put another 2880 in. IFA’s first reply was “Do you have PofA?”. Obviously he didn’t remember – that’s fair enough. Either his note-taking was so poor he hadn’t updated his records, or he was lazy enough that it felt easier to ask me, and it didn’t bother him to let me see that. My dentist is always up to speed when I see him. Either he remembers me or he reads my notes before I arrive.

50% of the time when I contact the IFA I get a message back the same day, but it says that he is on holiday and will get back to me in 1 or 2 weeks. My dentist is clearly more intelligent; clearly harder working (I can see him on a Saturday). The amount of work to qualify as a dentist is substantially higher than for an IFA. Both have to carry a large liability policy, and be prepared to answer to their legislating body if there is a problem.

My dentist offers cosmetic procedures. He also teaches others about cosmetic dentistry and has presented several papers at international conferences. In spite of this, he makes time to see NHS patients too. If somebody really needs a dentist, he will make sure they get treatment whether they can afford it or not. The IFA won’t work with you unless he makes minimum 2.5k per year. He charges a percentage, but the 2.5k is there in the contract. So if he screws up and your investments go to zero, you will still owe him 2.5k. He did have my sister in Woodford’s property fund. I told him I thought we should get out, but he said these things always go up and down. Fortunately this wasn’t her only fund. Of course, the fees still keep on rolling. My dentist has never really made any mistakes with me. On one occasion he started prepping for a crown, and realized that a crown wasn’t going to work well, so he turned it into an implant procedure and charged me the agreed fee for the crown, which was about half what the implant would have been. The equivalent for the IFA would have been to say “I really screwed you over with the Woodford thing. I will refund my charges for the last two years for the original value of the Woodford fund”. Some chance of that.

My dentist is by no means poor, but he’s just making a living. No fast cars or long holidays for him. The IFA has a detached house with a wall around it and an electric gate. Inside the walls there is a separate office building, plus 6 cars and a trophy wife.

I have been lucky enough to have an interesting job all my life. If I get reincarnated and am not so fortunate next time around, I shall become an IFA. I have yet to find a job with a better ratio of pay vs work vs talent. Anyone with the ability and the work ethic to become a dentist is, in my opinion, making a mistake if they study to become a dentist when they could be an IFA instead.

It shouldn't be difficult to find yourself a new IFA. 

I know many IFAs, and none of them treat their clients like that. Nor do they have gated houses with 6 cars and a trophy wife. To be fair, one IFA I know is a bit of petrolhead, and has four cars, one of which is a very fast Mercedes, but then that is their hobby.

All the IFAs I know have a far more similar work ethic to your dentist. It maybe, of course, that I keep better company than that of your IFA.

Strangely enough, one of my wealthiest clients is a dentist. They earn far more than I, or any IFAs that I know earn. Mind you, this dentist owns many practices, and has benefitted from good financial advice over the years, which has helped him attain that position.

Silvertabby

Deleted_User said:

jamesd said:

Deleted_User said:

In this particular case the firm and the advisor screwed up. I do think the individuals receiving the advice bear a lot  of responsibility.  Its their money.  Did they do due diligence on the firm? Did they understand how the advisor was paid and incentivized? Did they research the issues so they can ask the right questions?  Did they read and understand what was given to them? Did they look at a range of opinions? 

There's a vital question:

were the clients sufficiently capable to make those assessments?

In many cases I expect that the answer will be no, particularly in innumerate and also low IQ segments of a customer base. Part of the purpose of professionalisation of advice is to protect such clients.

Today, assuming you are healthy, there is no excuse for being innumerate. And if one is mentally challenged he should have supervision.  Its the eternal question of how far the state should go to try and protect all people from themselves. Regulations pile up but I doubt we’ll ever get there.  The more we try, the more people think someone else is responsible and the less care they take in making key decisions. 

Many of the LGPS members, both current and deferred, who transferred their pensions into 'cash now' schemes were low paid manual workers.

They weren't mentally challenged - they simply saw a sum of money on par with a  lottery win.  Investments and safe draw-down limits were irrelevant, and many happily told me that the money was destined for a big family holiday or wedding, a new car, kitchen etc.  

bostonerimus

Personal finance and pensions have become unnecessarily complicated and financial firms have profited by keeping things complicated so people end up paying fees for products and advice that they don't really need. There will always be some naive and or foolish people who make mistakes, but anyone with a little common sense and basic mathematical ability can successfully invest and save for a pension. The trick is to ignore 99% of the marketing and what passes for financial advice, organize your life so you have some spare cash to invest and implement a simple long term strategy. The most difficult thing is often finding the capital to invest given a combo of low wages, high housing and education costs and the constant encouragement to consume.

dunstonh

My dentist is by no means poor, but he’s just making a living. No fast cars or long holidays for him. The IFA has a detached house with a wall around it and an electric gate. Inside the walls there is a separate office building, plus 6 cars and a trophy wife.

Hardly comparable.  A successful dentist and a successful IFA will both be earning in similar ballparks.  A less successful IFA or dentist will earn less.

An employee IFA will typically earn a lot less than a company director IFA.   Much the same as a dentist in the same scenario.

Secret2ndAccount

dunstonh said:

My dentist is by no means poor, but he’s just making a living. No fast cars or long holidays for him. The IFA has a detached house with a wall around it and an electric gate. Inside the walls there is a separate office building, plus 6 cars and a trophy wife.

Hardly comparable.  A successful dentist and a successful IFA will both be earning in similar ballparks.  A less successful IFA or dentist will earn less.

An employee IFA will typically earn a lot less than a company director IFA.   Much the same as a dentist in the same scenario.

In my experience, certainly not comparable. If the dentist sees you for half an hour twice a year, he gets to charge you about £200.  If an IFA does the same he charges you £2000-5000.
I've had a number of dentists over the years. In retrospect, I don't think there was one that fell below the level of 'very good'. My anecdotal evidence suggests that a not so good IFA can stay in the game and make a good living. Of all of the group's earnings, I'm pretty sure the IFA was P1, possibly P2.

Ibrahim5

I always think it's funny when IFAs complain that they have expenses to pay. The dentist has all the same expenses plus much much more.

[Deleted User]

Secret2ndAccount said:

dunstonh said:

My dentist is by no means poor, but he’s just making a living. No fast cars or long holidays for him. The IFA has a detached house with a wall around it and an electric gate. Inside the walls there is a separate office building, plus 6 cars and a trophy wife.

Hardly comparable.  A successful dentist and a successful IFA will both be earning in similar ballparks.  A less successful IFA or dentist will earn less.

An employee IFA will typically earn a lot less than a company director IFA.   Much the same as a dentist in the same scenario.

In my experience, certainly not comparable. If the dentist sees you for half an hour twice a year, he gets to charge you about £200.  

And how much does he get to charge the taxpayer? 

[Deleted User]

bostonerimus said:

Personal finance and pensions have become unnecessarily complicated and financial firms have profited by keeping things complicated so people end up paying fees for products and advice that they don't really need

Thanks to the likes of Morningstar and Vanguard and WWW  its so much simpler now than it used to be. Advisors are useful for a lot of things but they are really an unnecessary layer for people just wanting to invest. And yet people use that layer.