When I was a young lad many years ago, I had the misfortune to attend a single-sex Catholic college. Apart from a few sixth-form classes shared with the local convent school, the only other concessions to anything resembling a mixed adolescent environment were a joint debating society and a French film club.
There, we were allowed to mingle with members of the opposite sex on alternate Friday afternoons. As a result, many of us boys found ourselves attending showings of obscure 1950s French movies and engaging in oratorical combat in front of small assemblies of pubescent lassies.
From memory, I don’t recall this devotion to the cinematic works of Jean Renoir, or engaging in stilted debates under the forbidding gaze of our respective English teachers, ever having the desired effect – namely that of being able to snog someone of the opposite sex.
Never mind: ever since then I’ve always had a soft spot for sub-titled films. Another plus is that I also learned to recognise a few rhetorical devices often used in public debates, something that has stood me in good stead over the years.
One of them is wilful misunderstanding, the misinterpretation of someone else’s words on purpose, often to make an unrelated point. In the words of one writer, it is “the unique ability to listen to one story and understand another.”
A classic example of such a rhetorical device came last week, when I wrote about Heather, Moor & Edgecomb, a firm of Wiltshire IFAs who advised a British Airways pilot in 2001 to abandon his generous final salary scheme and transfer his money into a private pension instead.
I wrote of how a company gave growth projections that were significantly higher than those permitted by the then regulator, the Personal Investment Authority.
Projections, incidentally, which even given a 9 per cent compound annual growth assumption over a whopping 22-year time frame, showed that total disbursements to the prospective client were barely £50,000 higher between the BA scheme and the private one.
Bear in mind that the starting retirement income for this former BA pilot from his final salary scheme was guaranteed to be £25,000 a year, index-linked, and would be more than £35,000 today with inflation. So the final disbursements involved over that time frame for either scheme ran to significantly more than £800,000. That much risk for relatively so little return?
These projections, by the way, did not take into account the effect of charges on growth in the fund. I have been in contact with Skandia, the company providing the drawdown scheme, and am informed that its annual management charges were 1.5 per cent.
In effect, the pension would have had to deliver compound annual growth of 10.5 per cent for 22 years to deliver the higher total disbursement I referred to earlier. By the way, the IFA was offering these projections in the aftermath not just of the 2000 world stock market crash but also the 9/11 terrorist attack on New York and the Pentagon.
Skandia also tell me that the standard commission for this little piece of business would have been 3 per cent of the sum invested, with an additional 0.5 per cent in trail payments. The client in question transferred a sum just short of £500,000 into this scheme, so it was clearly a very lucrative piece of advice for someone.
I also pointed out that back in 2008, this particular financial adviser was idolised by the IFA Defence Union, to the point where it actually backed a call for IFAs to contribute their own hard-earned money towards a legal action being mounted against the Financial Ombudsman Service.
Nor was this case of advice an isolated one. In fact, it was virtually identical to another that was tragi-comically defended in the pages of Money Marketing by a leading exponent of IFADU. That particular case went all the way to the Court of Appeal where the fair manner FOS conducted itself was unanimously upheld by judges.
Given all the above, what was the reply last week to my argument from one of that particular IFA’s longstanding public defenders? “Aha, another example of Nic having his little dig by dredging up some historic matter and using it to assign some credibility to his long-standing hatred of the IFADU and the widely supported campaign for the restoration of the longstop.
“It would be interesting to know whether Nic believes that the removal of the longstop defence for builders, surveyors, architects and the legal profession should also be contemplated.”
In other words don’t admit that your support for this IFA was a huge mistake and, instead, try to describe it as “dredging up some historic matter…”
Which brings me to my final point, and it is a simple one: poor advice is poor advice, whether five, 10, 15 or 20 years out. To deny someone whose retirement dreams have been shattered the right to obtain redress through a longstop is morally indefensible.
Those who defend the idea should be ashamed of themselves.
Nic Cicutti can be contacted at firstname.lastname@example.org