I’ve just read an article that could best be described as smug. It’s written by a lawyer in the financial regulation team of Foot Anstey – Alan Hughes. I don’t know Alan but I know his firm and have a high regard for it. But I think the article needs to be challenged.
The article deals with the minutiae of an FCA judgement against Standard Life and in particular breaches Standard committed of its duty to treat customers fairly and failings in its internal controls. Specifically this related to the selling of Standard Life annuities to the exclusion of the open market and with little or no regard to the enhancements in rate that customers might have got had the Standard Life salespeople cared a little.
Beyond these two breaches of FCA principles, the article draws a conclusion
Finally, it is worth bearing in mind this fine related to non-advised sales of annuities to customers approaching retirement and who may have been eligible for an enhanced annuity. If there was ever a situation which clearly demonstrated the value of advice it must be this.
This is what I want to challenge
Over the past three months I have become interested in annuities and have written several blogs about how we can get value from them. In this I have been helped by my conversations with annuity brokers, in particular Retirement Line but also Hub.
I have found that both these organisations offer an extremely professional service. Retirement Line in particular is regarded by its customer as exceptional and is rated #1 out of 96 financial services firms rated by Trust Pilot
I have found that though the annuity broking service is unadvised , it benefits customers by not just offering enhanced annuities , but guiding customers to their best enhancement. The “our in this slide refers to Retirement Line.
I learned that when a customer is asked how much beer they drink, not all beers have the same impact on longevity – or annuity rates
and I learned that missing certain conditions can have a huge impact on your retirement income.
I did not learn these things from regulated advisers, but from Retirement Line and Hub.
I also found out that there is a massive problem in Britain about annuity awareness
and I found that most regulated advisers are neither recommending annuities , nor do they have the competencies that give Retirement Line and Hub #1 and #2 place in the annuity broking market (respectively).
What little the public knows about annuities is coming from annuity brokers who offer great service and show massive integrity in their dealings with me and those who they speak to – who like me are finding ourselves awestruck by their competence.
And I am amazed by the hostility of financial advisers not just to annuities, but to me promoting annuity solutions in the Times and through this blog.
Why don’t financial advisers like annuities?
I was an IFA and I know why I didn’t like annuities- I felt deeply out of my depth arranging them. Indeed, when I started selling insurance with Hambro Life I was required to pass all annuity requirements to a specialist broker because I didn’t have the capacity to do a decent job for the customer.
Back in the day when everyone had to buy an annuity from their 226 or personal pension many people had guaranteed annuity rates, enhanced annuities were a twinkle in the underwriter’s eye and the open market was in practice restricted to those annuity providers with the best expense accounts.
For this reason, the behaviour of Standard Life (and the Prudential) is part of an ignoble tradition and most IFAs think that annuity brokers are no better than the cowboys at the insurance companies.
So IFAs feel out of their depth selling annuities, are worried that annuity salesmen are cowboys and thirdly they feel they hold the keys to unlocking retirement income through drawdown.
I hate to say it, but IFAs have got annuities all wrong
IFAs can use annuities as part of their retirement income portfolios without having to be experts in execution
There are some great annuity brokers in the UK but they don’t tend to be IFAs.
Annuities are brilliant as part of a retirement solution – as I talked about in a recent blog.
Will we ever have to buy an annuity again?
There’s been a lot of talk about the decline in annuity sales. I’m hoping that what we are seeing is an end to the poor practices we’ve seen in the past from the likes of Standard Life and the Prudential.
In my experience, the annuity broking market in the UK is one of the most competent I have come accross and firms like Retirement Line and Hub are setting standards other aspire to. This is reflected in customer Trust Pilot ratings.
Infact annuity sales are holding up remarkably well. If you exclude from new drawdown numbers the drawdown cases where all that is taken is tax-free cash (zero income) you can see that the numbers of people buying annuities is not appreciably less than the number of people “in” drawdown
But only a tiny part of the annuity sales are through IFAs while the vast majority of proper drawdown sales are through IFAS.
Foot Ansty are telling IFAs to take control of the annuity space but they are wrong.
IFAs are neither competent to broke annuities , nor do they have the capacity to. They can however see where an annuity is appropriate and should be referring annuity business to firms like Retirement Line and Hub who know what they’re doing.
George Osborne was wrong but he was nearly right. Here’s what he should have said