Oh for the benefit of foresight or was that hindsight? Or maybe even a little bit of an insight? I was attending the board meeting of an IFA firm recently and the compliance director was discussing the implications of the recent FSA demand to review structured products, which will not be a problem for the firm because of its controls in this sector but it will mean that the firm will have an unwelcome additional cost of £20,000.
Have you heard the new phrase capacity for loss? Have clients understood the impact of mortality drag?
Add this to the cost of the pension switching review earlier in the year and the ongoing demands of proving to the regulator that you are treating your customers fairly, let alone your clients, and we soon see that it is not just the cost of regulation but also the burden of compliance and future audit that is and will continue to be so crippling to firms.
Now the firm concerned will handle this all in its stride because it keeps looking so far ahead and thinking like the regulator.
It looks at what has been done in the past and project this to the future. It looks at what is going on now and projects this to the future and it looks to the future and the firm does its best to try and see what will be there. Not easy, I know, but worth a try.
So, what reference does this have to your retirement strategy? Well, I have two predictions for you. The first is that drawdown will be back on the agenda very soon.
Have you heard the new phrase capacity for loss? Do your drawdown clients have the capacity to end up with a lower income than they would have otherwise received? Have they understood the impact of mortality drag?
It was nearly two years ago that I wrote one of our first papers, Derisking Your Drawdown, and we have just taken the oppor-tunity to update this.
Companies should use their hindsight to look back to the origins of draw-down regulation from the PIA and their insight to see the rise in complaints recently reported by the ombudsman and therefore sight to simply see that these things add up.
I did say two predictions, didn’t I? Well, sometimes you also just need to use your gut as well. I suspect if you are reading this, you will not be affected because you are clearly trying to keep learning more about this wonderful market and those who are not, therefore, watch out, there is a regulator about.
The Retirement Partnership