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Carl Lamb: Unregulated guidance is a vision of hell


The Chancellor gave us his impression of old-fashioned magic when he pulled the pension changes out of his hat in the Budget. 

The industry was somewhat taken by surprise by his utopian vision of the future – all pension savers will be free to cash in their pension pots when they reach 55 and will use it wisely to provide for themselves and their families.

 What’s more, he announced that pension savers will have the right to get free impartial face-to-face advice on their options.

Turning the dream into a reality is likely to prove more challenging. Pensions Minister Steve Webb has already admitted that the advice – which post-Budget Day has morphed into guidance – will be fairly rudimentary and will include literature and websites.

Who will deliver the advice is the first question. Mr Webb has said he is talking to the Pensions Advice Service, the Money Advice Service and the Citizens’ Advice Bureau. Perhaps even more critically, there are already questions being asked about who exactly is going to pay for the advice, with one MP suggesting that there may be a need for an industry levy.

The Government is going to make £20m available but it is, apparently, just there to get the system set up – Webb describes it as “seed-corn money to get the thing going”.  It’s certainly not going to provide advice for everyone retiring in the coming years.

Here in the advice sector, it seems that George Osborne is in danger of delivering the very opposite of his vision. Unregulated advisers giving guidance on pension income choices that will have irrevocable implications for the retiree – paid for by us. It’s a vision of hell, not heaven.

The spectre of misselling is also hovering above us. Will whoever delivers the guidance become liable for the choices made by the retiree? 

If they have any sense, their advice will simply be to consult a “proper” financial adviser who will go through the whole factfind/research/suitability/risk assessment process before making any kind of recommendation.

Webb has told the Select Committee that the guidance will lead people to take more “formal” advice but warns that the cost of an IFA might be prohibitive for smaller pension pots.

Others have suggested that maybe the guidance can be delivered via a voucher system that can be redeemed with a choice of advice sources – consumer advice groups, IFAs and maybe even providers. 

This may indeed provide the best possible option for the consumer and should certainly be considered but it is paramount that whatever is offered guarantees the impartiality of the guidance.

The whole advice versus guidance question has clearly not yet been properly thought through and it seems likely that the consumer will end up with something that is a pale imitation of advice – unless they pay for more. 

What the advice sector must resist (and providers may do too) is to be faced with the bill for something that is actually detrimental to the consumer.

Carl Lamb is managing director of Almary Green



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There are 10 comments at the moment, we would love to hear your opinion too.

  1. Carl

    I’m afraid you are incorrect. It is a vision of the Government.

  2. PS

    Perhaps that’s the same thing!

  3. The way I see it:

    The average pension pot would not cover cost of advice, therefore guidance is needed in the main.

    You cannot mis-sell guidance as there is no personal recommendation, merely factual statements and options to consider.

    The cost to the industry for providing this will be substantial, a levy will be very unpopular and I could imagine a serious uprising should this be courted. The only people that will pay for this will be the ones who will directly benefit from it.

    Thus the natural solution will be the Insurers.

    Georgie-boy will likely be succeeded by a new chancellor come the next election and slide away quietly.

    The world keeps turning and the general population keep getting turned by the politicians.

  4. Money Guidance CIC 3rd June 2014 at 4:47 pm

    Well-argued, but I`m not sure that this issue is as binary as described. The representation of this problem as a choice between “unregulated advisers giving guidance on pension income choices” and consulting a “proper adviser” is in fact a misrepresentation.

    First, there is an acknowledged under-supply of advice. Second, there is (like it or not) an inescapable reluctance on the part of consumers to pay fees which reflect the going rate determined by a minority segment of the market. Third, to dismiss the scalability potential of organisations like TPAS to serve 11 million plus “orphaned” clients as at least part of a solution would be misplaced. Fourth, technology can, and will, bridge some of the gap and will eventually encourage greater consumer engagement in the financial planning process.

    For instance, professional advisers should certainly be rewarded well for their technical competence and knowledge, but to charge the same hourly rate for the population of a fact find, a risk profile questionnaire and a cash flow planning exercise might be considered questionable if consumers have already been able to invest their own time and expertise in covering off certain preparatory work.

    The advice market will only be expanded through collaboration with consumers at an affordable price and not through a Canute-like defence of how much we merit reward for our under-valued expertise.

  5. It appears that Harry Katz opinion of the government is somewhat optimistic – that the government has a ” vision ?” These are government lackies running around like headless chickens – who have no objectives ( other than line their little personal purses – by whatever it takes ) – or controls over spending taxpayers money e.g buying Robbing Bank of Scotland, LloydsTSB – funding a culture of corruption – and whose CEO’s and Directors Do Not Care about clients or their money.
    I would like to know the difference between Advice and Guidance ? Is advise the reports we read in newspapers recommending interest only mortgages – or endowments – or pensions such as ” stakeholder “, or auto enrolment . . . .with no come back – no retribution – with insurance company sponsored adverts – and industry feeds and misinformation – to sell their dodgy and highly charged products. Like Jamie Oliver selling meals . . . made out of tins of food from his sponsors at Sainsbury’s or internet product providers – advertising to children – This is he result of sponsors and inducements – whether to government officials . . . . . FIFA . . .football clubs . . .or Scottish snooker players . . . . it is unhealthy and it is most unfair . . . I call it Corruption . . . . . with a Capital “C “, just like the ” C ” in the FCA ?

  6. Philip Castle 3rd June 2014 at 7:42 pm

    @MG CIC – Whilst I would respect your right to anonymity (provided you don’t get personal) Your comments might be worth listening to if you at least state the background where you are coming from, I.e currently say – IFA, provider, regulator, politician and whether you have been the otherside of the fence at any point.

  7. Money Guidance CIC 4th June 2014 at 9:15 am

    #Philip – no anonymity at all: the website`s page “About Us” provides full details of the two Chartered Financial Planners behind the Money Guidance initiative. We merely believe that there is a case for clients to at least have the option to “do more themselves”, reach their individual brick wall and then call in professional expertise when they recognise that financial planning is a bit more complicated than, say, reading Ali Hussain`s weekly column in The Sunday Times.

  8. @ Money Guidance CIC

    I must of course bow to your greater experience of dealing with the impecunious, but I my experience they either don’t really want to engage and would rather spend any surplus income in the pub, or on a 50 inch HD TV. Or otherwise all they need is debt counselling. What is the point of putting anything into a pension when you have a few thousand quid in credit card debt on which you are paying something like 16% interest?

    What the MAS does is take the disingenuous route in broadcasting how many people ring up (probably in the belief that they are getting free advice rather than a bit of guidance). But what is relevant is how many actually translate this into some sort of positive action. And I would guess that this is something you can’t quantify and in my estimation would probably amount to a stack of beans. The really useful service for this cohort has always been the CAB and one wonders what you add to that perfectly good service. (Again the word advice appears!)

  9. Money Guidance CIC 4th June 2014 at 6:37 pm

    #Harry – I am not referring to the impecunious for, as you say, debt counselling is far more appropriate for many such individuals (or better still nipping this proclivity in the bud through greater National Curriculum emphasis…which is at last starting to happen). Nor was I referring to MAS, but rather to TPAS – which seems to be shaping up quite well now that Michelle Cracknell (ex-Lift Financial) is at the helm. At this stage, Money Guidance is focussing on the 7 million plus UK consumers with investable capital of £30,000 or above – too small for your own practice, but surely deserving of something more than just another DIY investing option? It may just be me, but to set out an appropriate financial planning framework to a growing, wider audience cannot be entirely misguided.

  10. Lest the FCA forget – Advice may be ” authorised”, extremely difficult to regulate . . .and severely lacking in so many places, . . . . London . . . Edinburgh . . .Newcastle . . . etc., What the paying community have is a regulator who is neither knowledgeable nor competent and who has been tasked the challenge . . .to control – the uncontrollable. As soon as the FCA gets one element under control with added regulation added burden of administration – most of those involved have moved. For example Tenet Group – partly independent – partly ” Resticted “, and Gill Davidson Director and head of regulatory at Tenet refuses to disclose the Status of her ” Appointed representatives “. Such is the overwhelming . . . . .undermining of Regulation by Tenet’s Owners . . . . Standard Life, Aviva, Friends Life and Aegon . It is interesting that so many insurance companies have so many different sales outlets . . .with different pricing . . .and the consequences are . .there is less competition . . .with the same providers . . .with different Routes . . to purchase the same product – The Cynical Selling Practices continue – with much the same charging and commission structure – in a different way . The HMRC has a term for a serious of transactions – designed to deceive, structures put in place – and yet arrive at the same outcome – without paying tax . . . . . This is the result of RDR – the incompetence of Politicians – trying to make changes – for their ego – Rather than Any Real benefit to society . . . .. we can only assume they pick up some form of inducements along the way – as they are prone ( and trained ) to do !

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