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Integrity should be integral

As I mentioned in a recent column, I was against residential property for Sipps because sensible asset allocation was likely to be cast aside.

That said, I was hoping that, after discussion, those enthused by pensions for the first time in their life could be moved to a more sensible investment mix while remaining enthused. That enthusiasm was off course dissipated by the Chancellor’s announcement. Whether we can capture imagination and impetus in the same way remains to be seen.

Regulatory Update 64 never created any issues for the professional adviser as their whole objective is to provide advice first and the product second.

For those still firmly in product-flogging mode many creative solutions were found, many using the age old remedy of embedded value. that is, plans where the payback period for the providers was heading for 20 years.

The news that RU64 is on the way out is not good when this industry remains so easily tempted by excessive commission. If you doubt that, consider why whole of life plans were sold in significant quantities by one major IFA instead of pensions. I have to line up, on this one, with my occasional adversary Mick McAteer of the Consumers’ Association, who is horrified by the proposal.

Unsurprisingly, the Association of British Insurers tells Mick that he is misguided. Next thing, they will be telling him that Raising Standards was a success or no one has ever been missold.

As insurers rush headlong into the world of Sipps, I do wonder what the long-term relevance the ABI will have for them. Perhaps its time for a fresh start for a trade body for the product providers.

Maybe IFAs could put a team together to look at ideas for a new body and invite tenders. After all, the ABI did it for us. IFAs have been lucky that the Aifa team have established themselves in a way that is far removed from the sterility of the committee structure that has kept the ABI in the last century.

Ironically, as RU 64 falls away, we have moved on to more transparent charging where the level is now dictated by the investment mix and not by some Treasury official.

As A-Day approaches, we see record numbers of Sipps being sold, or should I call them deferred Sipps? When insurers pay signif-icant commission on what is a simple switch, trouble is just around the corner. Luck-ily, one of the more “techni-cally challenged IFAs” has given us the means of escape.

On moving between Sipps, I know of one IFA who took commission, which was bad enough, but, in rebating the commission to the client, he has jeopardised the entire scheme of the provider under Revenue rules.

As we unscramble this mess, I wonder just how many Sipps where the source was a white-label Sipp, such as James Hay, are now with the label owner’s own Sipp following a switch, with little communication to the client regarding suitability and an unhealthy amount of commission creamed off.

Misselling, if the past is any indicator, invariably ties in with a level of commission that does not align easily with the amount of work that needs to be done.

As the world of football proves, integrity wins through eventually, mention of which reminds me of a sketch involving Pete and Dud, where Dud is teaching Pete the piano, Pete attempts to compromise Dud’s integrity, drawing protests from Dud. Pete responds with the immortal line “integrity is a valuable thing…and I am willing to pay for it!”

We should not be paying for it but we sure as heck need to ensure that we build a culture where it can thrive.

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