Transfer volumes fall, the FCA back in trouble and bears visit the woods

 

old school stockbrokers

Yesterday was one of those days where various stories break together like rippling waves onto a calm beach.

The House of Commons Public Accounts Committee, having read the National Audit Offices report on the BSPS fiasco, has duly called for the FCA and associates (FSCS,FOS but not tPR) to come to the headmaster’s office. An FOI from a compliance firm called Kroll, got the FCA to cough up some numbers which showed that transfers have fallen since the end of contingent charging. Andy Bell of the eponymous AJ Bell wrote in the trade press how pleased he was that his firm could do straight talking advice guidance to its customers. The Times ran an article on Port Talbot, five years on.


AJ Bell looks forward to using the FCA’s Guided Sales Model

really old money

I spent yesterday evening writing an article for a compliance magazine explaining that it felt like going back to 1987 when , if you were rich enough, you want to a private client stockbroker and if you weren’t an insurance salesman visited you. That was polarisation pre A-day. Andy Bell’s article put me in mind of the world of Wodehouse, where old money and new money rubbed uneasy shoulders with each other.

PG Wodehouse used the “visiting my broker” excuse to allow his caddish characters to indulge in Ugandan affairs in London but nowadays you are as likely to consult with your wealth manager at home or at least “virtually” at home.

But there are social advantages to being a “private client. Private client stockbrokers used to put it about that all their clients came from the likes of Blandings Castle, but Wodehouse would introduce into his stories bounders with new money who found their stockbroker a good way to meet those to the manor born. Such blighters are making life tough for those running wealth advisory firms (see below).

I’ve written before about wealth management as a social club and it really is a place where money talks. I wonder just how much the wealth managers with grubby handed steelworkers on their books, want them to mix with their social elite of Mayfair an the City – not much I’ll be bound.

But I doubt too many will make the journeys from Scunthorpe or Port Talbot to hob-nob it with their wealth managers. They might do better with the straight talking AJ Bell for whom guidance (not advice) looks like coming as part of the package (and at rather less than the price of advice).

Perhaps Andy’s home truths are more likely to expand your wealth than paying ad valorem’s to some wealth manager.


Be careful admitting members to your club.

The steelworkers will be more interested that the NAO has found that “in summer 2017, the FCA had limited insight into the DB transfer advice market and what was happening in the BSPS at the time of its restructure.”

The NAO estimate that steelworkers are out of pocket to the tune of £18m as a result of advice firms collapsing after their Professional Indemnity contacts ran out , leaving them unable to pay FOS restitution. FSCS is limited to £50,000 for claims against firms that failed before April 2019 and £85,000 for firms that failed after that date, leaving many with a shortfall between what FOS ordered and what FSCS paid.

We also know that many advisers were able to limit their liabilities by advising their clients to take a slice of the transfer cake often as a 55th birthday present. As soon as the transfer cake was touched, the compensation liability was frozen.

So the FCA, who’ve been thinking about it for the best part of a year, are expected to launch their redress consultation around the time they go to see the beak. It is unlikely to be as dramatic a meeting as Megan Butler’s visit to the Work and Pensions Select Committee in early 2018, but it is likely to result in some squirming buttocks nonetheless.

The steelworkers’ relationships with their advisers and wealth managers are unlikely to progress much further, especially many of the clubs are closed for good.  Lesson, be careful to choose your members carefully, the better clubs do.


Transfer numbers down (bears visit the woods).

There are various reasons being put forward by the Personal Finance Society’s Matthew Connell for the dramatic fall in transfers. Apparently CETVs are falling in value (as interest rate hikes bump up discount rates). Apparently the triage system is deflecting more inquiries into the “nothing wrong with your DB benefit” tray. But I doubt that improved process and reduced transfer values are what has really stalled the transfer market. What’s done for DB transfers is the double whammy of Professional Indemnity availability and the inability of firms to charge clients for successful work from the pension fund (conditional charging).

In January we learned that one of the pioneers of conditional charging, Tideway Investment Partners are facing an uncertain future as they await the results of  an FCA review of the transfer advice given in previous years.  Tideway ceased this line of business in June 2007.  Turnover, a key performance indicator (KPI) according to the financial statements, was £1.6m in the financial year ending 31 March 2021, compared to £2.5m the year previously. Operating profit, another KPI, plummeted from £1.3m in 2020 to £15,000 last year.

Transfer volumes down, compensation up and PI insurers not renewing annual contracts. Are we surprised that the transfer bonanza is over? Bears really do shit in the woods.


Meanwhile in Port Talbot

To end a day of reminiscence , I read  an emotive article on the scandal that Britain forgot

Imogen Tew has indeed written a fine account of the financial debris left by the BSPS debacle, acknowledged on twitter

Al Rush, who features prominently in the article, also thanks the author. I enjoyed this account which reminds me of time I spent listening to Al talk to people from his hometown.

It is a bright Wednesday morning and Rush is sitting around a coffee table with a casually dressed man in his thirties. The man, a former steelworker, seems nervous, nodding along warily to every word Rush says. After a short discussion, Rush tells the steelworker he may have grounds to claim against the financial adviser who convinced him to transfer his £120,000 gold-plated scheme, with a set income guaranteed for life, into a private, personal pension, with no guarantees at all. He was just 27 when he made that decision, which will affect him for the rest of his life.

It is five years since the British Steel pension scandal erupted, and it is only today that some steelworkers are fully realising the extent to which they were misled over the benefits, risks and downsides of leaving their final salary scheme. Rush has conversations like this day after day. His office is a steady stream of gruff-looking men, each nervous, each distrustful and embarrassed, and each wanting to know what can be done to get fair compensation for the bad advice.

Another wave ripples to the shore.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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