The advisers who went away

port talbot steel workers

Laura makes a good point and it’s one that goes to the heart of the retail distribution review.

Money paid to financial advisers should be for advice. Where an adviser charges ongoing fees for advice, there must be ongoing advice.

Currently, the mechanism for paying for advice is for the client to request that the advisory fee is no longer paid, but this is a mechanism that relies on the client being aware of the process and self confident enough to turn the fees off.

Why we need lawyers to get involved is that, as with PPI, most people don’t understand the process and even when they can see what to do, are nervous about doing it.

To put it bluntly, ordinary people are out of their depth.


Hitting the nail on the head.

I don’t know Laura Robinson or her firm – Thrings , but she clearly understands things from her client’s point of view and is refreshingly blunt in her views.

The only reason most of the Port Talbot steel men met with an adviser was to get the IFA to take on the responsibilities of the Trustees.

I refer back to this poll done by steel workers by steel workers in September 2017. “Take their pot and let their IFA manage it”

poll bsps anon

Most steel men I spoke to at the time thought of IFAs as some kind of independent trustees – they knew only the trustee model as all the wealth they had ever had was managed in BSPS by trustees.

There is an important point to be made here. BSPS Trustees were a free service that steel-workers took for granted. They simply weren’t prepared for the fees of wealth-management because many of them had no experience of paying professional fees.

It is sad that their only experience of paying fees may be  to advisers who have gone away.


Advisers – good and bad.

The wealth management model is good for people who understand wealth. These are people who have solicitors, accountants or at least know how professional fees work.

The wealth management model is absolutely wrong for people who don’t understand professional fees , don’t know how professional practices work and who are daunted by challenging their advisers when they realise they aren’t getting value for money.

Despite this , many financial advisers continue to extract large fees from these vulnerable people and they can do so through a frictionless process known as “contingent charging”.

Contingent charging works just like PPI but on a massively larger scale. It is a buy now – pay later scheme where the cost of the service isn’t felt by the customer till the money in the pension pot starts running out.

Contingent charging preys on the lack of knowledge, experience and confidence among blue-collar workers and others who may have money but have no experience of “wealth”.

We cannot regulate to stop financial advisers taking advantage of contingent charging (or indeed ongoing adviser charging). We can legislate to stop contingent charging and we should do – the FCA could write this into their secondary legislation now – though I fear it is way too late.

As for advisor charging, I think the onus is on the advisor to justify the fee , not for the client to estimate if they are getting value for money. I do not think that the majority of adviser fees are easy to turn off.  Turning off fees depends on the capacity of clients to understand what they have bought and as Laura’s tweets demonstrate – most of her clients just don’t have the competence , expertise and confidence to contradict the advice of advisers – which is to pay for advice.


IFAs are asking to be treated as professionals

Most IFAs I know are every bit as professional as lawyers and accountants. Indeed many lawyers, as Laura points out, have swapped advice for ambulance chasing and turned themselves into the kind of transaction-based  pariahs that the worst IFAs are being accused of.

Some vulnerable clients may lose as much to dodgy legal practices as dodgy IFAs.

And this is where we have to take a step back and ask just what is going on. We have a system of occupational pension schemes where those who work for certain companies get rewarded with a wage for life.

This system is disrupted by IFAs who take money through contingent fees on the basis they will do what Trustees did – which – in the steelworkers mind – is manage the pension pot.

And then it all falls apart when the steelworkers find that their IFAs are nothing like the trustees, that their is no highly experienced CIO managing their money, no actuary ensuring there is enough in the pot, nobody – nobody at all – acting in their interest.


This is why the FCA are so concerned

The fundamental problem at the heart of the transfer problem is that almost half of the people who are transferring (FCA number) should not be exchanging the fiduciary promises of their occupational pension scheme for the open market.

I’ll leave the last word of this blog to Stefan, who is a former steelworker and someone who has done more than most to protect his colleagues from financial harm.

BSPS Missing

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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