What do we mean by fiduciary care?

store pod

Travelling back from Newcastle last week in a much delayed train, the passengers in my carriage were trying to get to sleep. It was tough as the carriage were illuminated by the brightest of stip lights.

Eventually some of us summoned up the energy to find the train manager who – along with the train management team appeared to be having an extended cup of tea. One of us asked if the lights good be dimmed, the management team seemed shocked and the manager asked “why”.

We did eventually get the lights dimmed and those who wanted extra light used their individual spotlights above their head.

I thanked the chap who asked the question and he replied “so much for customer care”.

This is an example of a whole train being kept awake because the train management team weren’t paying attention to the needs of their customers.

It’s a good example of a failure in fiduciary duty, in the end it was a member of the collective who changed things and took control.


An example of fiduciary failure

There’s a good discussion about fiduciary care in this linked in post by Ben Fisher.

The post is a story on BBC about a Welsh worker who’s lost his pension savings through a Storepod investment . The investor bought the pod and thought that the trustee of his SIPP would make sure that the pod was used. It wasn’t and the pod is now worthless.

He said: “I phoned Store First, and a lady said ‘Your store pods are empty.’ I said ‘What do you mean they’re empty? They can’t be.’ She told me they’d been empty for two years… Nobody had contacted me to tell me.”

The investor had assumed that his trustee would look after him but the trustee did nothing (a git like the train manager).

Store First said they were never contracted to manage, advertise or let the storage pods – that responsibility, they say, lies with the pension trustee, Berkeley Burke.

It said: “Mr McCarthy has not purchased any store pods direct – he has instead arranged for a trustee to buy them, as part of his self-invested personal pension.

“We have asked the trustee, on two separate occasions, if they would like Store First to manage their store pods.

“The trustee has not however returned the management agreements we have sent to them. That is entirely within the power of the legal owners of the store pods. Store First cannot, and would not want to, force any investor to use Store First’s services to let out their store pods.


Where is the duty of care?

The notion that the customer’s interests come first, appears not to have occurred to Berkeley Burke.

No doubt they will argue that self-investment means just that – you manage the investment for yourself.

Judging by the incredulity of the investor, this notion hadn’t occurred to him.

So there you have it, investors being told to get stuck into an investment they have to manage themselves while the provider takes no responsibility for the investment other than to provide a platform and a tax-wrapper.

Who’s is the duty, the investor, the trustee or someone else?

I suspect that the original adviser (who went out of business shortly after recommending Store First and Berkeley Burke will not have the resource to compensate, if the Financial Ombudsman finds in favour of the investor.

That responsibility will then fall to the Financial Ombudsman and the Financial Services Compensation Scheme, funded by the guys who advise and don’t go bust.

The duty of care reverts to those who care.


Restoring confidence in pensions?

Clearly people expect those who manage their money to exercise a duty of care. In a recent conference NEST told delegates that when asked, members said that by investing in the Government pension , they expected the Government to provide them with a pension.

People don’t expect to be on the hook for managing risks when they have paid others to do just that.

Whether it’s NEST  or the Berkeley Burke SIPP, people expect the people who they pay to manage their investments to manage their investments.

When this doesn’t happen, they are incredulous. Just as I was incredulous that the man who managed the lights on our train asked why at 11.45 pm people wanted the lights turned down.

I am sure that every time a complaint is raised against a railway company or a pension provider , confidence in the service is eroded just that little bit.

Which is why the customer experience matters every time.

When fiduciaries stop caring, we really will have to start managing our money ourselves.


Proper outrage.

It matters a lot that fiduciaries care, whether they are running NEST or a SIPP or simply advising.

The retail pension system, though it might appear to be every man for himself, is much more collective than at first seems. Compensation is collective and so is the perception of “care”.

I do not currently have to pay the FSCS levy or fund FOS but failures like the management of this man’s Storepods are damaging to me and my business interests.

I’m glad to see the proper outrage from those commenting  on the article.

Someone has to care!

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to What do we mean by fiduciary care?

  1. DC says:

    From what you have described it sounds like an absolute disaster of a communication problem, and on the face of it the investor should be due compensation (and an apology) from the trustee by reason of mismanagement/incompetence.

    Apart from the compensation that might be payable by the trustee on their terms (probably via court order, as these things go) FOS might cover limited compensation if the complaint was about the advice (I think), but I can’t see that he was advised?

    If the investor genuinely selected the investment himself I don’t know against whom the complain would be? The SIPP provider for allowing the investment? I’m aware of a similar FOS case and I believe the investor was compensated along these lines.

    One thought did occur to me though, would the investor actually be covered by the FSCS?

    The purpose of the FSCS is as you describe: to collectively fund compensation at prescribed levies. However, not all investments are covered by this.

    I don’t have any problem with people investing their monies however they see fit, however I do take issue with the fact that the compensation always seems to be paid by those adhering to the rules. This ensures that compensation will always be available (even if limited) to the absurdly high risk/speculative cowboy type investments, because the ‘useful idiots’ playing by the rules will have paid their levy anyway, and are extremely unlikely to ever call upon the FSCS for that reason.

    It is high time a risk-based levy was introduced to avoid scenarios such as these. Indeed the fact that this doesn’t exist gives an indication of how far off the pace our regulatory bodies are.

    The FSCS should also refuse to pay compensation to the more obscure investments made (rainforest funds, moon cheese etc.), and perhaps then the ‘covered by FSCS watermark’ might actually be something that people would value (if only as ‘last resort’ cover).

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