How resilient are our pension providers?

One of the most important functions of  pension providers is to ensure that service levels are maintained through the current crisis.

It is a severe test, this time the consequences of failure are not theoretical, if service levels fall below a certain level then vulnerable customers suffer.

A trifling example (for me at least)

This morning I will have to find a printer (we have none at home) so I can print off a medical declaration form so I can keep on cover for life insurance. The declaration could be signed by me using my digital signature, instead I will have to post it to the insurer. This will involve me making unnecessary journeys to maintain a necessary service. In this case the customer is being put at risk (and putting others at risk)  to meet an inflexible process of a life company.

I will be reporting this incident to the insurance company as an example of its not treating a customer fairly.

Failure of financial services companies to adapt their processes to the impact of Covid-19 is not just a breach of TCF, it is evidence of poor controls. It is clear that forcing customers off risk because they cannot get to printers and post-boxes is not what insurance companies espouse, they promote well-being.

I am sure that the insurance company can afford to change its process to meet the needs of its customers, but it seems to consider allocating resource to the problem right now , a low priority.

I will of course find a printer and a letter-box, but what if I had been one of the 1.5m  housebound?

Let’s be clear, bad service is not necessarily a sign of low resource, it can just indicate bad management.

The admirable case of AJ Bell

Yesterday I read the financial statements of AJ Bell, the SIPP provider which included the following

This is admirable. Hats off to @AJBellGroup https://t.co/VDyWeBNsjz pic.twitter.com/nx3fXwITsl

— Henry Tapper (@henryhtapper) April 23, 2020

AJ Bell has the financial strength to do this. Most financial services companies have sufficient strength to maintain their service and indeed adapt it to the needs of their customers. I spent yesterday afternoon judging the Money Marketing retirement planner award , listening to submissions of 6 advisers who had , to varying degrees of competence, found ways to support customers through the crisis.

Though it was clear that some were better at managing the new technologies than others, what was clear was a common theme – that customers should not pay for Covid-19 through a reduction in the quality of service received.

It is clear to me that where there is a will to maintain customer service, there is usually a way. Truly customer orientated organisations, whether billion pound SIPPs or advisers working from home, deliver great service.

Less happy experience elsewhere

Compare that to the following message I received (I have redacted the provider’s name and anonymised the comment.

“Any idea of how many have been furloughed at xxxxxx? Service has turned into a nightmare. Surely they can’t be that close to the line? They have furloughed all out key contacts which are all roles which they still need at the moment and are certainly not redundancy roles”.

The reason why I am not naming names is because that provider is now dealing with the situation . I suspect that the provider’s is experiencing genuine financial hardship and that it is taking steps to put its house in order.

And that can only be evidenced by the provider rectifying service levels.

Rectifying problems

I have criticised Legal & General and Aegon earlier this month for not keeping member help-lines. This was not as a result of a lack of resources but of poor preparation. Aegon continue to run a skeleton service but as my correspondent points out

“Other providers have had logistical challenges and had to close their contact centres but are still available when needed. Aegon are on skeleton staff  up in Edinburgh but I still have 3 or 4 people I could be speaking with in 5 minutes”.

Legal & General now accept incoming calls and have changed their notices to clients, Aegon too have found a way to ensure that calls reach the right people and have made their systems more effecient. As far as I am aware neither have had to furlough for economic reasons. Their examples are akin to the insurer I’m dealing with – a failure to deliver in a time of crisis. To be fair to both, they have turned things round.

Where the reason for furloughing is the financial hardship experienced by the provider, we need to ask whether that provider has the financial strength to meet its obligations going forward.

Where  service fails from an advisor then customers should be free to find a new adviser, put simply they are paying for a level of service that has been withdrawn.

Where service fails from a workplace pension provider, the decision is often not the saver’s but the employer participating in that workplace pension. Employers – especially larger employers – take decisions as a result of advisers (such as my correspondent). These advisers are able to make comparisons and see service levels accross a wide range of clients.

Why the balance sheet matters

One of my correspondents on social media reproved me for praising AJ Bell

“Please stop fuelling the myth that asking for #help (e.g. government help) and admitting defeat is shameful. It takes courage to try and save your business or staff and admit you can’t do it alone. #Failure should not be stigmatised. If you are struggling. You have my support”

The anonymous tweeter carries on

To be clear applauding companies who refuse to ask for help and publicise this is indirectly criticising and judging those who do. We’re all doing what we can. Judgement isn’t welcome at this time

Though I can totally understand “vulnerability” in a personal context, I do not agree that we should accept low solvency as a reason to cut service. I appreciate that there are some mutuals who do not have resort to the capital markets and they should be given some dispensation. But necessarily providers and advisers must look to their balance sheets and ensure that they are suffeciently capitalised to meet regulatory reserving standards.

If the only way they can do this is by furloughing staff at a time when customers need support, we should question their capacity going forward.

If we take a different view, then it must be that such organisations are behaving opportunistically and looking to maximise profits for distribution to staff, management and shareholders and that , at this time, is more worrying.

The balance sheets of the companies we put our trusts in , matters most at this time. If we are running a company with a weak balance sheet and are entrusted with other people’s money, it is incumbent on us to reduce the risk to our clients one way or another

Providers need your feedback.

As I prepare to find a printer and a postbox, I am also preparing to write to my correspondent. I do know how many staff were furloughed at the provider he is talking of and I know that that provider is taking the steps I’m talking about to continue to offer value for money for its staff.

Right now, there are trustees and IGCs who should be monitoring service levels and ensuring that failures are not happening. The senior management of companies like the insurer who is messing me around, need to know if service levels have dropped.

It is not enough to sit back and blame COVID-19. If you can’t get through to your provider (on an important matter), if you have to post timely information and if you find as an adviser that “service has turned into a nightmare”, do something about it.

Contact your trustees , your IGC or your GAA. Write to the CEO of the company you are dealing with and bring your problems to their attention. Because there is nothing more important right now, than maintaining customer service. If companies cannot do this now, then we should be asking whether they are fit and proper.

Not taking anything away from ratings agencies such as AKG, but the true test of a provider or adviser’s financial strength, is its capacity to maintain service levels at a time like this.

Ultimately customers will be the judge.