PURCHASED LIFE ANNUITIES - *WHY* MUST I PAY FAT FEES IN 'ADVICE' TO BE PERMITTED TO BUY SUCH ?

dunstonh

2 An adviser saying pension advice is FCA COB regulated.  I do that first in full. Always.  Then we can talk more specifics. No waiviers. No exceptions. My PI insurer insists.  Audited deliverables.  Makes talking to them expensive out of the gate.  Certainly hundreds for transfer farms.  More for relationship IFAs targeting HNW. More again for unwanted or perceived difficult potential clients.  Quoting to deter or put up with it profitably.

The FCA want adviser firms to have their advisers singing from the same hymn sheet.  Same software, same processes etc.    The firm has to have systems and controls in place that cater to the lowest common denominator.    Bascially, the larger the firm, the more controlling the "employer" will be on the advisers that work for that firm (or if the adviser is networked under a principal firm).        

Small independent IFAs have far less in the way of systems and controls.   They still exist but a firm of 1-5 advisers is not going to be as restrictive compared to a firm of 6+ advisers.

There are many firms that exist that are in one of two stages.
1) build up as much AUM as possible before selling up to a consolidator
2) a consolidator that hoovers up those firms.

You probably want to avoid both of those.

We have seen on threads that the larger ones are not interested in doing execution only or limited advice.   Yet there are no rules that prevent either.  Even though some claim there are (sometimes inexperienced employed advisers don't realise that firm/employer rules are not necessarily the same as FCA rules).  Small independent IFAs are more nimble and are unlikely to have as many restrictions in their services as the large ones.    That said, the small independents tend to be very busy and time and capacity is their enemy.  So, you then get the scenario where they can do it but don't really want to as they don't have the time.

And the reason that they don't have time is regulation and compliance.    Back when I started in the 90s, you would have about 15-30 minutes work post meeting.   Now its about 4-12 hours.   You would think with computerisation, that it would be quicker but regulation and compliance has made it longer.      How does the employer reduce that time?  They restrict what your advisers can do.  They centralise processes, product selection and investment selection. Then you end up with a tied sales force with limited ability to go outside of that.   But small independents don't want to be like that.  So, they put up with the workload.

saneman39

flyingchap said:

I'm of pension age now and have spent the last year reading up on all the Pension terrain, familiarising with all the Annuity types and so on and getting to grips with how it all works.  All fine EXCEPT FOR ONE REAL ODDITY: 

Annuities come in a range of types,  when purchased from a Pension pot (a pot of funds still in the tax-not-yet-paid  'stratosphere' pending use in retirement).  

Annuities ALSO come in a range of types when purchased from SAVINGS,  that is from tax-paid monies in a Bank. 

So far so similar. 

BUT:  while I am free to get quotes and if I wish,  entirely manage the buying of Annuities of many sorts  *from my pension pot*...    

...I am (told) I am NOT SO PERMITTED when it comes to Purchased Life Annuities UNLESS I have paid for MONSTROUSLY expensive 'advice'  from an IFA  (the-price-of a-good-used-sports-car-for-ten-minutes-advice    kind-of-monstrous).  

The ONLY 'mechanical' differences between the two (std life annuities & purchased life annuities) are that  

(a) they are taxed differently -- uncomplicated, and 

(b) the location of the monies pre-purchase. 

Yet in one situation I am trusted without "advice",  and one NOT.   

Does anyone know WHY ON EARTH this is ?    Given that it must affect millions of people ??

I will call the FCA if I can't find some wisdom on this.   

ONLY reason I could think of,  might be governmental  AML  worries,  which MIGHT be forgiveable,  but in which case we should be told this.   

And WHY is the 'advice'  so mind-bendingly expensive ?   My very experienced lawyer will sell me 30 minutes of high grade legal advice  for  £100.     An 'IFA' seems to think they're worth £2K-6K for the same kind of interval.

All wisdom appreciated.   Best wishes to all. 

 

Hi, I've read the thread. I am not sure if you were actually looking for such a cash annuity product or just debating, but did you ever find a company which would sell you an annuity for cash because I haven't been successful so far.  Incidentally, I was very sorry to see a few very unkindly replies. What was your conclusion? Regards.

dunstonh

saneman39 said:

flyingchap said:

I'm of pension age now and have spent the last year reading up on all the Pension terrain, familiarising with all the Annuity types and so on and getting to grips with how it all works.  All fine EXCEPT FOR ONE REAL ODDITY: 

Annuities come in a range of types,  when purchased from a Pension pot (a pot of funds still in the tax-not-yet-paid  'stratosphere' pending use in retirement).  

Annuities ALSO come in a range of types when purchased from SAVINGS,  that is from tax-paid monies in a Bank. 

So far so similar. 

BUT:  while I am free to get quotes and if I wish,  entirely manage the buying of Annuities of many sorts  *from my pension pot*...    

...I am (told) I am NOT SO PERMITTED when it comes to Purchased Life Annuities UNLESS I have paid for MONSTROUSLY expensive 'advice'  from an IFA  (the-price-of a-good-used-sports-car-for-ten-minutes-advice    kind-of-monstrous).  

The ONLY 'mechanical' differences between the two (std life annuities & purchased life annuities) are that  

(a) they are taxed differently -- uncomplicated, and 

(b) the location of the monies pre-purchase. 

Yet in one situation I am trusted without "advice",  and one NOT.   

Does anyone know WHY ON EARTH this is ?    Given that it must affect millions of people ??

I will call the FCA if I can't find some wisdom on this.   

ONLY reason I could think of,  might be governmental  AML  worries,  which MIGHT be forgiveable,  but in which case we should be told this.   

And WHY is the 'advice'  so mind-bendingly expensive ?   My very experienced lawyer will sell me 30 minutes of high grade legal advice  for  £100.     An 'IFA' seems to think they're worth £2K-6K for the same kind of interval.

All wisdom appreciated.   Best wishes to all. 

 

Hi, I've read the thread. I am not sure if you were actually looking for such a cash annuity product or just debating, but did you ever find a company which would sell you an annuity for cash because I haven't been successful so far.  Incidentally, I was very sorry to see a few very unkindly replies. What was your conclusion? Regards.

The OP set the tone initially and some of their posts and others were removed.  So you don't need to apologise to them.