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Complex question

Do complex pensions and regulatory scrutiny of areas such as Sipps and pension switching mean retirement planning will become an area of specialist advice that general IFAs will be unwilling or unable to advise on?

Alan Lakey
Partner
Highclere Financial Services

Yes I think it will for certain types of client. In a relatively simple scenario in terms of where someone has reached retirement age and the discussion of how to go forth, whether it should be an annuity, etc, if it is someone with a pension fund of £50,000, then the question kind of answers itself to some degree.

When it comes to, say, someone aged 40 earning £150,000 who already has a pension pot of £100,000, then his choices are going to be not only wider but he will likely be more aware of his options. He will want to have a strategy put in place designed around his current situation and reviewed on a regular basis.

There has to be a recognition in the RDR and the industry in general and within the regulators that there is not such a thing as a pension planner

For that later scenario, you need a far greater awareness than you do for the first one. In a way, this is part of the problem with the RDR – it assumes that everyone does everything and that is not the case. A chap came to me the other day and he has £300,000 in three pension pots, so he wants advice on annuities and so forth. I am very happy with that and I am There has to be a recognition in the RDR and the industry in general and within the regulators that there is not such a thing as a pension plannerdealing with it. Another chap came to me and he has £120,000 in preserved benefits with his ex-employer and I passed him across to a guy who can deal in pension transfers. I am not allowed to talk to you about it, I can’t even offer a viewpoint.

If I get someone who appears to be very complex or may or could require advice outside my remit, then I will pass it across.

For this type of business, I deal with the simpler cases, partly because I don’t find pensions that interesting. But there has to be a recognition within the RDR and the industry in general and certainly within the regulators that there is not such a thing as a pension planner.

There are varying types, there is a very indepth chap and there is a basic chap and the knowledge I need for assisting a typical client with a pension pot of £50,000 to buy an annuity is not what I need for the other business. Unfortunately, the regulator does not see it that way.

If I could design my perfect business model, say, there were five people in my business, I would specialise in protection, someone would do mortgages, someone else would do pensions, someone else would do investment and someone would taxation or overall planning. That would be perfect because we would share our clients and we would integrate our advice.

The reality is that firms do not work that way, what they tend to do is maybe turn business away or pass it across to someone else. What I don’t need to do is take three or four examinations to do something that forms a small part of my business.

Amanda Davidson
Director
Baigrie Davies

If the advice is straightforward, the general IFA can deal with it. When we talk about retirement planning, yes it is going to get much more complicated but it already is complicated.

When all the changes happened this year in terms of pensions and the tax rates for higher earners, I thought it was completely woeful because it affects huge numbers of the clients that we advice who are still working.

I was thinking, what on earth does one do for these clients in terms of advice? And you realise that you can’t have a blanket solution, it has got to be each case looked at on its merits because it depends on what other assets they have got, what their plans are, what their plans are for those assets and the When all the changes happened this year in terms of pensions, it was woeful because it affects huge numbers of the clients that we advice who are still workingwhole thing becomes really complicated.

When all the changes happened this year in terms of pensions, it was woeful because it affects huge numbers of the clients that we advice who are still working

That kind of top end retirement planning already has become a specialist, it is specialist financial planning and specialist investment advice you are giving at that stage, and I include Sipps within that.

But let us not lose sight of that fact that the best ann-uity rate may well be the extent of the planning that is offered or appropriate to them.
It depends on what range of clients you are dealing with and what their scope is in terms of their wealth. You can’t come down and say it definitely going to be one way or the other, I think it depends on how complicated the client’s needs are.

I hope it is true that if any IFA feels that something is outside their remit that it is passed on to someone who can deal with that.

The problem with IFAs is that we are all trained to be really helpful and we all want to help the client out. Maybe passing on will become more prevalent but I don’t think it is that prevalent at the moment.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Alan, is spot on how any IFA can pretend to know everything about every aspect of financial advice is beyond me. I may be Chartered but I know my knowledge of Mortgages, Corporate Planning and protection is very basis. My knowledge of pensions is acceptable (even with G60) but I regard myself as very good at IHT and Investment Planning.

    Therefore to be in a partnership with 4 other experts and all share clients is the only way forward for the IFA of the future.

  2. I ahev come to the same conclusion as Tony. I will probably need to form a partnership with 4 other IFAs to rpovide the service as described above. the question then becomes do we each remain directly authorised Ltd Companies working in partnership so we have chineese walls to prevent contamination or do we merge under one compnay with one authorisation?

  3. Speaking from a provider point of view it is abundantly clear that many of the IFA’s we deal with do not have the suitable knowledge or experience to properly advise their clients on complex pensions matters.

    Some of the questions we get asked are fairly basic and I would expect IFA’s to have known the answer.

    I believe that advisers do sometimes need to take a step back and accept that they may have the required knowledge in certain areas and work with other advisers who do to meet the needs of their clients.

  4. We work as pension technical support for Financial Advisers and so are able to help them with technical complex pension questions as well as Pension Transfers.

    We can also accept referral business if preferable.

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