One of my clients recently did a very silly thing. He tried to set up a pension on his own using an application form from Norwich Union.
He had just left the employ of one of my bigger corporate clients and taken up with a new one. The employer was happy to pay into the existing provider's scheme on his behalf. Easy, right?
Well, no actually. The client included my name on the application form as his adviser and referred all queries to me in the covering letter. I probably do not have to tell any administrator what happened next. His first letter had no fewer than nine items outstanding including moneylaundering forms for him and the company, a record of payments due form, an illustration reference, evidence of earnings, confirmation of waiver details, confirmation of indexation required, a trust form for nomination of beneficiaries, answers required to questions 3c and 41b sub-section 7 line 4, his favourite colour and who he thought might win the men's 1,500m in Athens this summer.
It was a stark reminder of how much administration we advisers are now required to do for a relatively simple transaction. I am not blaming Norwich Union for even the smallest part of this as it was diligently chasing up everything it was required to. My concern is what this level of administration is doing to what is surely the number one issue in financial services – how do we get people to save more of their money today to make tomorrow brighter?
Thanks to a meeting with me and a stiff drink, my client has finally sorted out everything required.
It strikes me that, along with political correctness, outsourcing and David Blaine, this has gone too far. I recently had an executive personal pension reported to Opra because of non-payment of premiums by the three members, who were the only directors and who had agreed together not to pay premiums until the company cashflow improved. The life office reported the scheme to protect the members from the employer. That would be the same people who were stopping the premiums, anyway.
Who exactly is the victim worth protecting here? They were putting the business first and were fully aware of the financial consequences, if not, it transpires, the legal consequences. This is over-protective nonsense. They could face a fine if the letter of the law is followed. That will help the pension fund and the business, will it not?
I have nothing against Opra, either. It enforces the rules, that is all. But over-reaction to the Maxwell scandal has actually led to the disappearance of some of the best final-salary and other defined-benefit schemes in the world and this sort of silly rule is from the same stable.
If you want a laugh, present the pension simplification proposals to your auntie or, better still, to someone in your office who still uses a rate book. Watch the expression on their face as they wrestle with the reality that they are in fact several hundred million brain cells away from the new simplified level of knowledge required, having never even attempted to understand pensions previously.
Scottish Equitable's Stewart Ritchie once told me how the Queen enquired about his long career in pensions as she presented him with an honour. Apparently, he got to the fifth word and her eyes were already glazing over. I doubt if ma'am has a stakeholder, then.
So, IFAs will get bigger and poorer, scrounging commission from life offices which are trying to survive on £1.50 a year from super-cheap stakeholder pensions that hardly anyone has bought because they do not understand them and the paperwork terrifies them. Anyway, pensions are useless. Buy to let is the answer.
My solution is easy. Keep doing a great job for your clients while pointing out to them all this nonsense we have to put up with, just as dentists and GPs are doing right now.
Send a message to the most interfering, autocratic, centralist Government for decades, that financial advisers deserve better and that now our clients – the voters – understand that too and want it put right.
Always assuming you have the time, of course.
Steve Buttercase is an adviser at M2 Financial