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Adrian Boulding: DB transfers need independent guidance service

Boulding-Adrian-2012-700x450.jpgThe state of the defined benefit transfer market is shocking. News stories break with alarming repetitiveness of advisers withdrawing their services.

If this was cowboys being driven out then perhaps we could say life was improving. But I know a number of the advice firms withdrawing and I rate them highly.

Over the years, my job has brought me into contact with many advisers and I have yet to meet one that does not care deeply about the financial wellbeing of their clients.

So I was further surprised last week when a popular pensions blog site reported back from a fact finding trip to South Wales, where they met a number of ex British Steelworkers who had taken advice on the merits of moving their DB British Steel pension to a Sipp.

Apparently, some had been offered investment funds that guaranteed to pay 5 per cent per annum, while others had been assured their Sipp would double in value in 10 years.

But before rushing to pin all the blame on the adviser, let’s consider the role of the client in all this. When you take an individual that is already seriously stressed, as steelworkers must be given the upheaval and uncertainty the industry they love so dearly has been through, then ask them to make a complicated decision about mind-blowingly large sums of money, it is hardly surprising they struggle to understand what their adviser is trying to tell them.

This is one of the reasons why we are looking to investigate the merits of an independent guidance service for people wanting to move from DB to DC.

Not to replace advice, because guidance is very different. But precisely because a guidance service does not lead to a recommended action, it is much less stressful. It can take place upstream, in calmer waters, well ahead of the maelstrom of decision making.

What is more, an independent service like PensionWise has absolutely no interest in the outcome, so cannot be accused by the consumer press of shepherding customers in a particular direction for financial gain. So trust in the service is not undermined by journalists seeking a quick headline.

What a good guider does is equip the customer for the journey ahead. In some cases, the customer may feel confident enough to make an execution only decision. But in many others, they will emerge better equipped to enter into an advice session.

Going into that advice process with a good idea of what the decisions will entail, of the considerations the adviser will be taking into account, of potential questions to ask, will lead to a better outcome. One where the customer understands their adviser’s recommendation and grounds for making it.

I will finish on understanding and a challenge for emerging guidance services. I do not think it is good enough just to dispense guidance; a guidance service should form an assessment of whether the customer has understood the issue at hand. If they have not, they should not be signed off as having successfully received guidance.

Adrian Boulding is director of retirement at TISA

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. What a load of rubbish, I have now seen the 1st World War, Irish mine field sweeper at work put your fingers in your ears and walk slowly, I think the term is called Barack Room Lawyer. There is absolutely no point of a “Guidance” service, they are a complete untenable obfuscation and political correctness disguised as a Quango. What we need is Regulated Advice and the Products restricted to Regulated Investments and a Duty of Accountability imposed on the Product Providers.

  2. Not quite sure what you are saying here. Clients need to be educated and fully informed with what the difference between a DB scheme does compared with what a DC (Drawdown inevitably) does. All pros and cons which then clients can make decisions on without being swayed either way. If clients do make a decision either to transfer or not transfers, then the responsibility needs be laid at their doorstep. People should be able to make their own minds up in the majority (not all) cases.

  3. So the proposal is that the client obtains guidance, finds somebody to process on an execution only basis, then a claims company will encourage selective memory and FOS will find against whoever allowed the transaction.

    I have said before that if there was a centralised clearing house for non advised execution only cases, with no liability for the industry, then by all means use PensionWise as a conduit and the responsibility rests with the client.

  4. As the owner of a popular pension website myself, I think that the promotion of TPAS and Pensions Wise throughout Time to Choose would have improved decision making, mind you the provision of a monkey with a pair of cymbols could have improved the quality of some of the advice on offer. Adrian is right in pointing to systemic flaws in the support given to vulnerable steel men.

  5. It’s a nice idea but are there sufficient numbers of people of sufficient calibre available to provide guidance on such a highly complex and specialised subject? And, at least as much to the point, are the people to whom they’ll be providing it likely to be able to make sense of all the information with which they’ll be presented? Many people may well emerge from such guidance sessions more confused about the best way forward than before they received it.

    When all is said and done, lay people, ultimately, have to put their trust in an expert who’ll tell them what to do and the problem at the moment appears to be that too many of the available experts aren’t actually as expert as they like to present themselves.

  6. Also, to cover all the relevant bases, just how long would one of these specialist guidance sessions need to be? Not long ago, one of the existing guidance bodies reported the cost of its average session to be in excess of £500. So how much would a session on a subject such as this cost? £1,000? £1,200? By how much would our levies need to be increased to cover these extra costs? Or would those extra costs be allocated just to the relatively small number of firms practising in this area?

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