Tom Kean: Suitability system is ruined to the core

Tom Kean

Picture the scene if you can. It is the middle of a particularly dull spring and the warmth of summer is long overdue. I am sat here looking at a suitability letter for a very nice client of ours, who is one of those that fits our model of advice absolutely perfectly.

He and his wife have recently visited our delightful offices on the banks of the River Thames in Henley. I have known him for over 20 years and have finally persuaded his wife to come and meet the team as well. We have created their cash-flow model in great detail and all agree it now looks as close to their vision of the future as they could possibly imagine.

They have finally come to a point in their lives where they need to metaphorically push all the papers across the table and ask us to look after everything. Our fees have been agreed and the notion of an annual visit (probably around Regatta time) should become a habit. On the face of it, all seems well.

So why do I have a slightly glum feeling? It is not the long-overdue signs of summer, that is for sure. Could it be I am halfway through their suitability letter and have pretty much ground to a halt in a convulsion of twisted rules, acronyms and back-covering clauses?

Honestly, you should read it. My summarising “paragraph” is a page long, with copious mentions of the LTA, AA, tapered AA, IP16, FP16, VCT, EIS, get-out clauses and, finally, warnings about “daft politicians”, crystal balls and the need for us to second-guess what will happen after the Brexit vote.

Of course, I could go on. And do not think I am mentioning these things for fun or merely to cover our backs. Their situation is quite complicated, so all the technical angles are absolutely needed. And that is the point. It has become so complex that clients have zero chance of understanding things. Great for us as advisers as it keeps us in a job I suppose.

But it is a system that is ruined to the core and designed to catch you out rather than draw you in and compel you to save. And it is not just anecdotal now. There are real clients, with real pots of money and real jobs that have just given up trying to make sense of it all.

And yet, get this. After all this effort on our part – all the huge detail we expertly impart to our clients, the raising of standards and the changes made to our business models – any old Tom, Dick or Harry can set up a master trust pension and flog it to anyone eager to get the automatic enrolment task off their desks. No regulation. No protection. Sometimes no tax relief. Just rubbish.

Sorry to sound all dramatic but how can we exist in a world where you would get more joined-up thinking from the residents of a nursery school?

Tom Kean is director of Thameside Financial Planning