The 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