Advisers should welcome (not fight) the FCA’s review of in retirement advice

Thankfully , I find  Al Rush’s tweet shocking. If I didn’t – I could have no faith in financial advice and financial advisors.

The vast majority of clients of IFAs rightly  consider they get a good quality of service and value for the cost of their advice . Most advisers will look forward to the FCA’s thematic review into advice given in retirement just as most advisers welcome the Consumer Duty which they are preparing to adopt.

So I was surprised when I was shown  an email from a law-firm proposing to advisers it  set up a second action to protect IFAs from an investigation of the value of the advice they offer to people in retirement.

The intent of the mail is to create another action group to ward off the threat of the FCA’s impending thematic review of ongoing advice in retirement.

The firm sending the E-mail, is FS Legal, the Birmingham solicitors who advise the British Steel Action Group.

For those unfamiliar, members of the BSAG, who take legal advice from  FS legal, have taken the FCA to the Upper Tribunal of the Royal Court to have the redress scheme that promises to compensate mis-sold steelworkers for poor advice to transfer our of the British Steel Pension Scheme.

A number of IFAs have been found to be offering those who have an opportunity to claim (but haven’t claimed) a small cash payment not to pursue a claim. This has a distant echo in the provision of sausage and chips dinners to steelworkers to engage them with Active Wealth Management , the most notorious of the “factory gate” advisers who caused most damage.

The FCA claim that several of the advisers engaged in “buying-off” claims are also members of the BSAG. This behavior discredits good advisers (and the BSAG).

Now lawyers involved in one action are looking to start another. Whether intentionally or not, FS legal are linking the FCA’s thematic review on retirement advice with the FCA’s redress scheme for steelworkers which can do no favours to the vast majority of those offering later-life advice.

IFAs ,  as  those in SOLLA ,  are proud of the work they do and I hope will have nothing to do with any attempts to obstruct the regulatory process of this thematic review.


So how can  the client or the FCA assess “Value for Advice given”?

The FCA is  part of a value for money team , set up by the DWP to look at how service for those offering workplace pensions can be valued. These paragraphs touch upon the matters of support and guidance in a recent consultation.

115.We accept there are challenges with a consistent measurement and quantification of a subjective and qualitative concept such as ‘quality’. Measuring ‘quality’ is difficult not only because of the differences in rules between scheme types, but also because different schemes have different membership profiles, and the expectations of savers vary between memberships and the different stages of the retirement journey. Therefore, the metrics must reflect saver experience and demonstrate how they have helped savers at critical junctions in their pension journey where they need support to make good decisions.

116. We are proposing an approach where the quality of service is measured against the member outcomes it delivers. Instead of requiring schemes and providers to report on a large number of service metrics, some of which are qualitative, we propose that schemes and providers report on selected elements of service that are quantifiable.

This shows us the direction of travel of Government thinking on value for money . It is not enough to have clients who are saying they are happy, service has to be measured quantifiably. The metrics for establishing whether due care has been taken of a client’s affairs need to strike the right blend of qualitative and quantitative assessment,,

Sadly, it is hard for many clients to understand what they should be getting by way of care and what they are missing out on, when they are being offered a sub-standard service. That is why we need a regulatory intervention.

People’s circumstances  change through retirement. A good adviser will consider wider assets and factors such as income tax, capital gains tax, inheritance tax as well as the  performance  of assets within the pot. Life expectancy changes too, for better or worse as does the need the client has to set aside resources for care.  These considerations are often finely balanced and they need to be properly documented.

Thematic reviews go further than a simple VFM assessment,   As many people who take advice, are  unaware of the opportunities they have to manage their retirement finances, advisers need to be proactive and not assume that advice given at outset can be set and left. While most people are unaware of change, an adviser must be aware and respond to the changes he or she sees in the client’s overall situation.

So the value of the advice needs to be based on more than  the attitude of the client to the advice given and even the fees taken, I expect the FCA to take a keen interest to both the objective analysis of outcomes and the quantifiable reaction of the client by way of a rating of services offered.

Most IFAs will welcome such scrutiny of their work.

Those who choose to take action against a thematic review will be drawing unwanted attention to themselves.

 

About henry tapper

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