Al Rush and I drove down to Wales yesterday and spent a day in the Taibach Rugby club at the invitation of the moderators of the BSPS Facebook groups.
Good chatting with steelworkers in Taibach. Met up with a schoolmate from thirty five years ago. Great use of a day. With @henryhtapper pic.twitter.com/VSh7SVtuaH
— Al Rush (@RAF_IFA) November 8, 2017
It was helpful to understand a little of what it’s like in Port Talbot. Al grew up there and many of the steel-workers we met knew Al from school. Thanks to the club for making us so welcome and supplying us with the bottomless cups of coffee and tea we all consumed!
It is not until you sit within a stone’s throw of the factory gates that you can understand how important the Port Talbot Steel Works is to the communities of the town – such as Taibach.
What we found
We did not meet great numbers of members, but we were busy for seven hours with small groups wanting individual help. We were not there to tell people what to do but to help them find good financial advisers as they thought about their options (including the option to transfer).
We found
- That those people who had met advisers had no benchmark for judging either the quality of the advice or its cost
- That there was general confusion about value for what was being paid for advice, implementation and ongoing servicing.
- That there was confusion about whether the advisers were offering advice or simply outsourcing advice to third parties (outsourcing).
Costs
Some people we met had shopped around and got wildly carrying prices and solutions. We found little evidence of advisers suggesting anything other than transfers. The cost of advice, transaction and ongoing service was generally expressed as a percentage of the transfer value and was typically 2% of the CETV for implementation and 1% for ongoing advice (paid on top of product fees of c1%). The average transfer value of those we spoke to was £350,000.
We did not see any justification for these costs, though one gentleman who asked for a justification of a 2% up front charge was told that this was what the FCA suggested.
Value
We did not see any evidence of cash-flow modelling by advisers. Most people we asked, found it hard to explain the basis of the adviser’s recommendation and gave as reason for transfer, it was what they wanted.
Most people had been recommended insured products, typically from Zurich, Prudential or Royal London. We found a lot of confusion – especially among those looking at using Prudential’s Prufund, more than one person we met thought it was giving a guaranteed return (of around 5%).
We found little understanding of the risks of drawdown. We did not hear one mention of annuities. While people were generally aware about the PPF, BSPS and BSPS2, we found there was little awareness of the risks of what they were transferring to and considerable trust that the financial adviser would take care.
One person we talked to, thought he had spoken to three tied representatives of Zurich, Prudential and Old Mutual. He could only articulate the advice he got in terms of the solution presented.
Outsourcing
There appear to be three kinds of advisers operating in Port Talbot.
- Travelling advisers who turn up from other parts of the country, offer an incentive for meeting (chicken in a basket), conduct advice sessions and then are away.
- Local advisers who do not have the qualifications to advise on transfers and who outsource to specialists who provide the certificate needed for the trustees to release funds
- Local advisers who do the work themselves.
We met with local advisers doing the work themselves but not with the (1) and (2). Coincidentally, the FCA were reported on making a pronouncement on the state of the market that drew similar conclusions (Megan Butler as reported in New Model Adviser).
‘We often found the route cause of a lot of these issues related to the business model, the business model between the firm and sometimes the specialist transfer firm. In part some firms which had seen significant growth in their DB transfer business had defaulted to a commoditised, industrialised process, an outsourced process perhaps, not focused on the client’s individual needs,’
Conclusions
We did not see enough people to make any general statements, but what we saw concerned us.
The advice given by the trustees to use unbiased.co.uk is not being heeded. The market for advice is forming around availability of advisers not around suitability. We found a low level of understanding of cost and value and a confusion about where the advice was coming from.
Considering the sums involved, we see a considerable transfer of value from member’s pension rights to the advisory community and on to pension providers. The concept of “independence” is not high on the agenda and most advisers talked of advisers as gateways to getting their hands on their money. There was little awareness of the contracts that members were entering into with advisers or people’s rights to move away from advisers and cancel the advisory agreements they were signing.
We were not there to discuss the quality of the decisions being taken, though Al did valiantly talk with members about their future cash flow requirements.
We were there to help people meet good advisers – and they did. In Al they saw how things could be done and though Al is not putting himself forward, we have now met advisers who have an approach to the problem that offered a high quality of service at a rather more reasonable price than what was generally reported from those we spoke to.
There are some 43,000 steelworkers who are eligible for a CETV from BSPS. All of them should be looking at this option and most will need to take advice on whether it is right for them, and if so- what to do next. There are rather less qualified advisers to help them.
If Steel-workers want help with signposting to good quality advisers, we can now help, though we cannot advertise these generally.
If any BSPS member wants help with finding an adviser, they should contact henry.tapper@pensionplaypen.com or Al at al advice@yourwealthcare.co.uk. If they need more help with their options , they can speak to TPAS on 0300 123 1047 or the helpline provided by BSPS.