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Govt questioned over Budget guidance qualifications

The Government has been questioned by Labour peer Lord kennedy over what qualifications those delivering pensions guidance will need to hold. 

Earlier this week the Treasury published details of the guidance guarantee which will support the Government’s flagship pension reforms set out it the Budget. Savers will be able to access the guidance service as many times as they like. As of yet, no qualification requirements have been set out for those delivering the guidance.

Speaking to Money Marketing ahead of the debate, Lord Kennedy said: “I’m concerned about the quality of the guidance. I would hope people giving the guidance will have some sort of qualification. The fact you can be unqualified and be doing this is ridiculous. How can we be sure they actually have the expertise?”

Kennedy is concerned that if the guidance is not up to scratch, the pensions freedom agenda the guidance is designed to support could end up in another misselling scandal.

He said: “We are now going to allow people to dip into their pension pots and they will get guidance and I worry we are at the start of another big problem.

”People were advised to opt out of Serps and get personal pensions and that was madness. There has been a whole litany of this kind of thing in this sector. I want to know whether we have learned the lessons from the misselling of the past.”

Responding to Kennedy’s question in the House of Lords this afternoon the Government’s Treasury spokesman in the Lords, Lord Newby said: “The FCA will be the ultimate backstop in terms of the quality of the advice and monitoring the advice and we will be legislating to give them that explicit power.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. It seems to me that once again we see policy being made up on the hoof. Who represented financial planners/advisers in the discussions around this new guidance? Do politicians really believe that those giving guidance will not cross over into advice?

  2. The government has got into a bit of a twist. What it wants for all retirees is IFA advice but it is not willing to accept the level of cost this would mean so it wants to do it on the cheap. It is dancing on the head of a pin to find something which looks like comprehensive advice to the outside world but is pretty cheap overall.

    As always “advice” (or guidance) which is very cheap or free quite often is not very good or has no protection for the advisee who uses it for the basis of their actions.

    In the very late 1990s a reasonably intelligent employee of a prestigious employer came to me for advice on investing a lump sum. I made a recommendation for investment in well regarded unit trusts with a good spread of risk. The client came back to me and told me that her father (a civil servant with relatively limited experience in finance) had felt my recommendations were not “Ballsy enough” (his words) and she was going to invest directly in a number of tech stocks. Subsequently they fell over 90%.

    This provides the following questions : whom should she have been able to sue in this situation for poor guidance or advice? Would he admit to providing advice or tell her it had been “guidance only” but her understanding was it was a recommendation. What records of the conversation were there/proof it was suitable/What was the discussion around risk. To whom could she appeal to force the person providing advice to give redress. Where would the redress come from (did her father have over £100k to compensate her)

    It’s not to say my investments recommended at the time wouldn’t have lost her money in the near term (they would) but overall they would have lost less and also would have at least fitted her attitude to risk (which the investments she chose certainly did not) with a right of complaint, appeal and redress if this was found to be poor advice.

    Verbal advice is not worth the paper it is written on.

  3. For the vast majority of people, this guidance will conclude that their next step should be to seek out a qualified and authorised adviser. Why does the FCA continue to shirk its responsibilities to consumers by shying away from mandating OM as the default option with a 10 point Things you need to consider leaflet? This would get people as quickly as possible to where they need to be, namely in discussion with an adviser, most of whom don’t charge for their initial meeting anyway. Guidance without advice is highly unlikely to achieve anything of any real value to consumers. All it adds are yet more costs for the people actually doing the job of advising people.

  4. The government has got into a bit of a twist. What it wants for all retirees is IFA advice but it is not willing to accept the level of cost this would mean so it wants to do it on the cheap. It is dancing on the head of a pin to find something which looks like comprehensive advice to the outside world but is pretty cheap overall.

    As always “advice” (or guidance) which is very cheap or free quite often is not very good or has no protection for the advisee who uses it for the basis of their actions.

    In the very late 1990s a reasonably intelligent employee of a prestigious employer came to me for advice on investing a lump sum. I made a recommendation for investment in well regarded unit trusts with a good spread of risk. The client came back to me and told me that her father (a civil servant with relatively limited experience in finance) had felt my recommendations were not “Ballsy enough” (his words) and she was going to invest directly in a number of tech stocks. Subsequently they fell over 90%.

    This provides the following questions : whom should she have been able to sue in this situation for poor guidance or advice? Would he admit to providing advice or tell her it had been “guidance only” but her understanding was it was a recommendation. What records of the conversation were there/proof it was suitable/What was the discussion around risk. To whom could she appeal to force the person providing advice to give redress. Where would the redress come from (did her father have over £100k to compensate her)

    It’s not to say my investments recommended at the time wouldn’t have lost her money in the near term (they would) but overall they would have lost less and also would have at least fitted her attitude to risk (which the investments she chose certainly did not) with a right of complaint, appeal and redress if this was found to be poor advice.

    Verbal advice is not worth the paper it is written on.

  5. Lord Kennedy seems to be in a twist as well. He wants the people giving advice to be “qualified” but when it comes to the people who are qualified, i.e. IFAs, he clearly feels that they are untrustworthy due to the personal pension scandals.

    Can’t have it both ways I’m afraid – either the “guidance” has to be delivered by those tarnished qualified professionals (a voucher system giving everyone a no-obligation initial meeting with an IFA would be easy to set up) or we can pull some of the legions of unemployed PPE and social studies graduates off the streets of London, give them a one month training course and some flowcharts, and hope for the best.

  6. If it leads to a miselling type scandal then te FCA will levy a fine on say MAS. MAS will then increase the levy that regulated firms to pay for it even though they had no involvement.
    Anyway I though people who contracted out did quite well, they wil get their flat pension from the state have a nicemoney purchase pot as well, the others just have the flat state pension due to the guidance the FCA gave.

  7. David Cathcart 23rd July 2014 at 3:29 pm

    This is now becoming a farce and the financial services sector yet again being made to look complete idiots.
    Is this a typical example of how ministers legislate and why is Lord Kennedy and Andrew Tyrie the only ones to raise concerns. If I were Labour leader I would be making great political capital out of this debacle. So why silent voices from Westminster and Canary Wharf. What view would the FCA take if were a private company trying to launch this type of service with unqualified “advisers” , rather than Government quangos
    It will be a sad day for all if the FCA play ball with these ridiculous proposals.

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