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Nic Cicutti: Why can’t advice be charged on a case-by-case basis?

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One of the supposed benefits of the pensions revolution, announced by Chancellor George Osborne in March, was the freedom to access some or all of your retirement funds at age 55, subject to income tax on the amount cashed in.

Money Marketing revealed last week experts’ concerns that savers with legacy pension plans could be excluded from the reforms, given the charges they face if they try to move their savings. 

The story was picked up by a number of national newspapers, which reiterated the point that a combination of extremely rusty admin systems and high exit charges means accessing their pension pot is out of reach for many tens of thousands of savers.

In an article in the Daily Telegraph, senior political correspondent Christopher Hope spoke to insurers and a range of experts, including the indomitable independent consultant Ros Altmann, who lambasted the industry for not letting people do what they want with their money.

Intriguingly, Hope also spoke to Legal & General pensions and strategy director Adrian Boulding, who said: “Older contracts were set up before the days of computers and most companies will not be able to offer these customers the new freedoms easily. Ours will be able to if they switch to a modern policy but unfortunately this may involve exit charges.”

Computer says ‘No’

Boulding has a reputation as one of the most forward-thinking pensions experts in the UK. So for him to blandly acknowledge his own company’s inability to fix the problem by removing those very same exit charges standing in the way of the Government’s pension objectives is truly a ‘Computer says no’ moment.

Although my experience is not identical, I offer the following story as evidence that Hope has a point, especially for self-investors like me currently making do without an IFA and preferring to keep doing so if possible. 

Don’t get me wrong, I have no problem with paying an IFA for advice. I just want it to be on a case-by-case basis, in the same way as one would deal with a solicitor.

In my situation, I need access to my pension’s 25 per cent tax-free lump sum but am finding it difficult to achieve simply and quickly.

As regular readers will know, we suffered a fire at our home last year. The renovations have made the entire site resemble a lunar landscape and we are forced to live in rented accommodation. So we are taking the opportunity to build an extension to the property. 

To finance the build, we have raided our worst-performing savings and are asking our lender to let us draw back down part of the mortgage we had previously paid off. But there will still be a gap, which I hope to bridge by using the lump sum from my pension.

I have about £150,000 accumulated in a single personal pension with Skandia. It used to be seven separate pension schemes but a combination of Skandia’s low charges and choice of investment options led me to transfer over my other funds earlier this year.

Doing so through an execution-only broker, with me filling in all the paperwork, cost just £100 in admin fees.

I am also a member of several deferred final salary schemes. Current projections suggest the combined income will be about £17,500, with payments set to begin at various retirement dates between the age of 62 and 66. My wife has an additional projected income from a scheme she belonged to in the 1990s.

There is also pension minister Steve Webb’s glorious state pension to come for both of us, not to mention a decent five-figure sum invested in a range of Isas.

Yes, we could use some of that Isa money instead but we would prefer to leave it untouched if possible. The tax-free income will be welcome in retirement, even for lower-rate taxpayers like ourselves.

The question, therefore, has been how to transfer my funds from Skandia’s personal pension into its collective retirement account. This should allow me to take the 25 per cent lump sum while still leaving the remaining amount invested until we are ready to take some income from the pot in 10 or 15 years’ time.

The problem is, Skandia is not keen on doing this without an IFA to transact on my behalf. The likely cost will be at least 1 per cent of my personal pension – possibly more, depending on the IFA’s charges.

In other words, in return for giving an IFA my personal information that proves I am eligible for an income drawdown scheme, and them filling in the paperwork to say this is the case, I can then access my own money – as long as I pay them at least £1,500 of it, not to mention a possible VAT bill.

Strangely enough, I am not desperately keen on the idea. I don’t mind forking out a few hundred quid if absolutely necessary but the rest of it just sticks in my throat.

As things stand, I am attempting to go down the execution-only route for this transaction. Skandia, to its credit, is looking into how to make it possible.

But what this small episode suggests is the ability to access an IFA’s services for only part of a person’s financial planning, while leaving them to decide on the rest, is as hard today as before Osborne’s Budget speech.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 47 comments at the moment, we would love to hear your opinion too.

  1. Why do you assume that no IFA will charge you less than £1,500 to arrange what you want to do on an EO basis, Nic? Shop around.

  2. Why not wait till next year and take the whole lot or wait for the free pension advice/guidance for the people who / cant wont pay, that my paying (realise the value of advice)clients subsidise.

    Suck it up Nic or is it the fact you just don’t like paying for things, most of my profit pays for people, who add no value to what I do, or goes to pay for other peoples mistakes !!!

    Trouble is Nic if you DIY and make a mistake chances are you will still be probably able to complain as I bet some-one some where didn’t tick a box, or give you the right piece of paper !!!

  3. Buy cheap, pay twice, Nic.

  4. It sounds as if Nic Cicutti is trying to pick the brains of his readers so that they will come up with the solution to his problem and then he will go on line and do it at no cost for the advice. At the end of the day you only get what you are willing to pay for and if you are not willing to pay for advice you will not receive any. I am sure that if he was shop around he would find someone willing to provide the advice at a reasonable cost. However, the crux of the matter is that he places no value on the knowledge of financial advisers and thinks that he knows as much as they do.

  5. Nic you of all people should know that as an advised transaction the relevant IFA is putting his livelihood on the line due to the never ending potential liability, so why would someone do it for less? I can understand you not wanting to pay £1500 for the service but that unfortunately is the cost of the expertise, research, recommendations and protection any advised transaction brings. You never know Skandia may not be the best place to stain your pension – As the BBC would always say “other providers are available” and without the benefit of advice you may never know.
    Good luck with your quest I wish you well and do let us know what the final outcome of this situation is.

  6. You sound like one of those clients that you know is going to be trouble.

    Any sensible IFA would just tell you to ring Ma!

    Good Luck!

  7. According to Rory Percival we cannot do case by case. We should have a set of standard charges and clients can go tou our website to determine the cost of that advice – on a case by case basis.

  8. Nic, like most things in life you can usually do them yourself if you want to.

    Do you change the wheels on your car or do you pay the garage to do it? If the latter one would question why you would be willing to pay a manual labourer to carry out a relatively simple task but you seem averse to paying for advice, which also affords you cover under the FSCS, from in many cases highly qualified professionals?

  9. There is the DIY market and the IFA market. If you want to DIY then use the products and services set up to deal with DIY. Yes, it may mean you wont get the cheapest deal on the market but that is to be expected. A provider using an IFA to do a lot of the work would be expected to be cheaper than a DIY company that has to do a lot of the work. You cant have your cake and eat it.

  10. Nic, you are not looking at the role of a Financial Adviser, we have compliance, admin, printing, telephone, research costs, not to mention retention costs, and advice redress with No long- stop.

    It’s not an impossible job, to do it by the DIY route.

    To be honest, with your lack of knowledge on what an IFA does to earn his money and your inability to want to grasp our other costs, most IFA’s would be happy for you to go down the DIY route!

  11. opportunity cost is the price many DIY pundits pay and for many that will be a lot higher than having put their hand in their pocket. It’s why I don’t hang my own wallpaper, a rubbish result and a load of time down the drain

  12. Skandia wants an IFA to be responsible for the transfer so that when Client X complains to the FOS that they’ve spent all their pension and should have been told to buy an annuity, they can pass the buck straight to the IFA. They do not want their defence to be “the client signed a statement that they were execution-only and made their own decision” because the FOS usually takes the view that there is no such thing as execution-only.

    Don’t forget that the FOS is a consumer champion and that the standard is “if the client thinks they were given advice, it was advice”; therefore to avoid paying redress Skandia would not just have to prove that it did not give advice, but that the client didn’t *think* they were getting advice. Which is pretty difficult. So Skandia’s stance that it wants an adviser to be responsible for this liability is common, and very sensible. It will be interesting to see how many of those wishing to take advantage of the new pension freedoms run into the same problem.

  13. I wonder if Mrs C is reading the advisers comments here?

    Like my wallpaper hanging, my wife may think she can do a better job (she can) so I let her. There are things I am better at doing and then there are things that we both think it better to pay a professional for and that includes dentistry and medicine. It also included drafting and registering lasting Powers of attorney for several of my family members, which I COULD have done, but chose not to as it was not good use of my time.

  14. I sympathise with Nic’s issues, but sadly it’s a reflection of the current regulatory envirnment in which the the industry exists. The reality is that providers do not wish to risk any potential future liability therefore require it’s diverted elsewhere. Signed execution only declarations (even if in blood, sworn over whatever is holy to you and declaring in bold letters “it’s all my own fault”) are no longer the protection they once were.

    I shall find myself in the same situation in due course – being in compliance for years, G60 qualified and something of a drawdown specialist checking such business is correct is a daily event – but I will still have to get a firm to “sign off” my own personal business with whatever (hopefully moderate) charge they feel necessary to shoulder the potential libility.

  15. Nic, the biggest trend in the advisory world is people exactly in your situation, who want to DIY most of the time, but occassionally may need advice. 9.7 million people, according to Platforum, want to do all or most of their planning themselves. For this they need access to advisory services which offer them one off, adhoc advice, and, where applicable, focused or limited to specific areas of their finances. There are firms who already offer this.

    There will always be a market for clients who want delegation services – a more traditional advisory/ planning service/ relationshop and then ongoing reviews. However, not everyone wants this and advisers should not try and shoehorn clients into ongoing service relationships or holistic planning when they don’t want it.

  16. @Danny Cox

    advisers aren’t trying to shoehorn anyone.

    The service most prefer to do and offer is an ongoing service,

    The consumer can choose to go find someone who is willing and wants to do transactional work, no-one is stopping them,

    There is enough work to go round for us to focus solely on those who WANT and are willing to pay for an ongoing service, just as there is plenty of work to do for you with people who don’t want advice.

    The problem is those who want buy at the non advised price, but then getting access to the protections offered by advice, i.e. FOS, FSCS and so on, but are not willing to pay for it and then blame advisers for not being willing to work for zilch.

    I’d like my solicitor to do everything for nothing and a car mechanic, but I still have to pay if I don’t want to do it myself and I can do basic legal work and basic mechanics, I just prefer to get someone who does it day in day out to do it for me.

  17. Nic, don’t be a cheap skate. You could easily find an IFA who charges fees on a time-costed basis rather than a fixed percentage of your pension’s value. Try an accountancy firm with an IFA arm. Mind you it won’t necessarily be less expensive! Or other D2C providers (HL for example) where you could transfer your Skandia pension to take the tfcs and convert the balance to drawdown.

  18. Nic, you are in the pleasant situation of believing you know sufficient to transact this business yourself but resent the cost being indicated. This is the cost of the multiple levels of protection which have been constructed by the regulator over many years, some very much needed and some where a form of gold (Platinum!) plating has been undertaken.

    The real problem is untold numbers of other people who will say that they are happy to transact similar business on an execution only/non recourse basis (because it is cheap) but will turn around and look for someone to blame / compensation when it all comes crashing down. There is no willingness by large numbers of people to take any responsibility for their own actions, no matter how asinine. I tripped and fell on a subsided pavement just this morning. As I am a responsible member of society I brushed myself off and sent an email to the council when I got home. For many this would have been the start of a gravy train of claims.

    We exist in a claim culture built largely by this and previous governments, Nic you are unfortunately benefiting from the movement in society to treating everyone as an infant. Caveat Emptor no longer exists in Financial Services regardless of what you sign.

  19. As with all services that have the potential to do harm, there are things that can be self administered and things where it would be advisable not to. Health matters are a good analogy.

    Self diagnosis and treatment for a lot of things is fine and you can buy over the counter medicines for many conditions. Other things could be done yourself but may be less advisable and some matters are reserved for professionals only, regardless of any wishes you may have for self-treatment. Why? Because the more complex things have a tendency to go wrong. Things are less well defined in financial services which I guess is why Skandia would prefer (rather than require?) you deal through an adviser. In reality they should be congratulated for having your best interests at heart.

    Asking Skandia to carry out your instructions is akin to going to a doctor and asking them to provide a drug, no questions asked. Would your doctor do it? Their ethics would quite rightly be called into question if they did.

    Of course, if you were a qualified doctor there would be no problem prescribing for yourself, but you aren’t in that situation however much you think you know what’s good for you.

    It is interesting to note that MIFID II strengthens this whole area and places far more restrictions on execution only transactions to add to your angst…

  20. I’m with Julian on this.

    Where a client has a clear and unambiguous transaction requirement, then a time/cost fee can be at a reasonable level, certainly less than Nic assumes in the article. The tricky bit is then discussing and agreeing what level of on-going service and support Nic would expect, and what he would be willing to pay for it.

  21. In response to some of the comments here: I’m clearly not trying to crowdsource advice, as I have already stated what I wish to do with my own pension funds.

    As far as FOS/FSCS etc are concerned, I’m also clearly asking for the transaction to be non-advised.

    Having made clear my wishes for this transaction to be considered an execution-only one, and in a paper with a mass circulation within the industry to boot, the issue of me being able to make a complaint with even the remotest chance of success would be infinitesimal anyway. That is in addition to the kind of contract I would be signing with that IFA anyway.

    I am willing to take advice where necessary – for example I’m more than happy to be advised by an investment expert as to how the pension portfolio should reflect my attitude to risk. I will pay an appropriate hourly rate for this as I know it involves research and skill.

    But I don’t want to pay for things I can do myself. By the way, for those who think that I make an exception for other professionals like lawyers, I have used the online small claims court service and represented myself in court several times to obtain redress where necessary.

    This involved reading up on the law, putting together the necessary documentation, appearing in court and in one case actually taking on a solicitor hired by the other side. No biggie – and I won.

    Finally, having substantially rebuilt my first house from what was a shell back in 1983, I’m actually good at painting and wallpapering.

    My experience then actually proves my point today: in the same way as I prefer my relationship with an adviser to be on an as-needed basis, I did use an electrician, a central heating engineer and one or two other trades for the technically difficult bits and paid them a proper rate for the job.

    But in addition to the decorating, I took up and laid my own floors, prepared the entire house for damp proofing by removing all plaster to waist height, chased all the channels for the electric cabling, laid the water cables, took down the roof and helped to re-roof it, fitted my own windows and so on.

    As a student nurse back then, I could not have afforded a firm to do all of that for me, which was why I did it myself. Today, I want control over my own money with IFAs becoming involved WHEN I decide. The fact that some of you don’t get it speaks volumes.

  22. Nic despite what you say, your article was clearly written in a way to attract some advisory response. If you want to take your PCLS to fund home improvements on an EO basis then we do not need to know all the detail.

    Just the other day I read an article about a man who took his pension annuity and he unfortunately was diagnosed with cancer during the cooling off period. He did not take advice and decided to buy his annuity from Prudential regardless of his notification of his diagnosis and being in receipt of a cancellation notice that covers changes in personnel circumstances. Now Prudential are being held accountable. An IFA would have never let this happen…

    I will make no comment on your own personal situation as you clearly can’t afford me!

  23. @Nic – The fact that most advisers on here probably wouldn’t want you as a client also speaks volumes 🙂 hopefully no offence given or taken?

    As you say, you don’t want an adviser here and it is not advisers stopping you from (your wishes) being executed. It is the providers fears of carrying out an un advised procedure without someone else taking the can and advisers not wanting to take the risk of being accused of giving advice and having a complaint upheld by the FOS in 99 years time as there is NO respect for timebars, let alone the longstop at the FOS. A longstop would not be a necessity were they actually following their own rules on timebars, but I only heard earlier this week of another adviser being pursued for a case from 25 years ago and FOS deciding they had jurisdiction!

    If I was an older adviser, I definitely would not be getting involved in a case like yours as retire would be too soon for a defence. At 49, we might just get a longstop re-instated/respected before I hit age 83!

  24. “I want control over my own money with IFAs becoming involved WHEN I decide. The fact that some of you don’t get it speaks volumes.”

    Nic, that’s a fair comment up to a point. Going forward that won’t be an option for certain actions where DB scheme members are concerned. Is that wrong in your view? Where do you draw the line? There are lines when it comes to drugs, electricity, law, etc. I note you won your court case (so rightly smug) but if you’d lost because you weren’t aware of a legal technicality would you have seen it differently?

    Also, if the product provider suspects (or even knows) that the execution only client will be causing themselves harm by their request what should their obligation be? I suspect most people will want to have their cake and eat it in this respect…

  25. Nic

    I think Money Marketing should run your article as a case study and offer a prize for the best IFA answer 🙂

    But consider the following;

    1) Have you switched your Skandia fund to cash? If not markets and funds will determine what 25% cash looks like in £ terms when you take your TFC(in other words have you de-risked your funds yet?)

    2) Do you understand the current tax consequences if you take TFC and then die and Mrs C needs/wants the balance of your pension fund as a lump sum? Have you considered the life assurance you might need between now and your selected retirement age to replace the “loss” of the TFC from death benefits?

    3) Have you worked out the consequences on your longer-term finances of taking the TFC now? By how much will that action reduce your retirement income at your chosen retirement age? What steps will you take to gap-fill?

    4) What rate of growth will the balance of your fund have to achieve in order to replace the 25% TFC you take now, at your chosen retirement date? How does that rate of growth compare with your tolerance and appetite for risk and reward?

    5) What actions are you taking to replace the savings that you have raided and to repay the mortgage that you have drawn down?

    6) Why have you determined not to use the ISA money? What do you see as the advantages and disadvantages of not taking the ISA money? (what are the IHT consequences) 25% of £150,000 is £37,500 so you could take that from your ISA and still have a lot left over (decent five figure sum)

    Validation of actions/numbers, challenging thinking, taking a long view and considering all actions not in isolation but as a series of linked events IFAs do all these things really well and charge accordingly.

    I don’t think you are looking for advice, I think you want someone to act as a post box

  26. Ha ha ha

    Nic you cant expect to put your laughing gear into a wasps nest and not come out looking like Lesley Ash !!!

    If you want to DIY just do it (albeit that you cant use Skandia) why winny and whine about not wanting to pay for it, and as another post pointed out, Skandia are dead right to say go get advice, good on them !!!

    And to think MM would have paid you to write this drivel, hope it covers you pending advice fee or not whatever the case may be !!!

  27. Nick Bamford stop giving Nic professional advice… he does not want it, and if he did he now has achieved his aim of getting it for free!

  28. Have to agree with Nic. Seems to me that too many here see the position as either DIY or Advised with the adviser, naturally perhaps, wanting to control as much of the activity as possible.

    At the end of the day it is all about market segmentation. There is and always will be a segment that will be willing to do whatever their adviser says. They will happily pay a % of fund as a commission or as a “feee” . There will always be a DIY segment taking no advice whatsoever.

    The segment where the investor simply wants occasional ad hoc advice is the one that I see growing in the future. D2C will allow the investor to implement ( if the investor wishes) the advice given by the adviser. Naturally the advice will be one off and fee based rather than the trail % style so popular today.

  29. @Bones – Whilst I don’t disagree with you. There are not enough advisers out there to service the first section you mention and as such why would they stop doing that to service the likes of the third segment now?
    The new adviser with no client base, maybe, but then they are not building up any guaranteed repeat business by focusing there and unlike teeth, cars and people moving, there is no compulsion (pain for teeth), MOT for cars and so on) for financial ADVICE, just “Guidance”. What people want is guidance but with the backing of someone to blame (advice) if something is overlooked or would have been were it not for the advice from someone who specialises. Very similar to Nic’s legal case, where fortunately he didn’t miss anything and so won his case.
    I have had clients who I have told that I can’t make enough of a difference for them to warrant paying my fees before and yet they have said they still want to engage me and pay my fees, just for the peace of mind. When it has been borderline, I’ve taken them on, but when I really just could not justify charging them I’ve either had to turn them away or do it pro bono, but you can only afford to do so much pro bono and with Infinite Liability (i.e. no longstop) my wife understandably doesn’t want me doing too much pro bono with infinite risk for nothing!

  30. Sorry Nic when you actually, truly understand how the FOS REALLY work then come back and tell everyone how you are ‘clearly’ asking for the transaction to be non advised.

    Having dealt with the FOS for many years as a CMC (how many people are still reading and have not just thrown their mouse throw the PC screen?) the FOS do not understand the concept of ‘non-advised’ – we dont deal with EO but i understand this situation is very similar. When you buy PPI on a credit card and the statement clearly says ‘we highly recommend you take this policy’ and the FOS say ‘no recommendation was made’ how does this equate???

    What i am trying to say is that IFA’s charge a fee for a reason and unfortunately too many people just dont understand what they are actually getting and what is involved in proper financial advice. They all too quickly look at the fees they have to pay and say my bank can offer this to me for free or i can find this out on the internet. BUT you dont get the same level of security and your bank is not and has never been free and has anyone ever googled any cold symptoms you have? You either have Ebola or are pregnant!!!

    Fortunately we dont have to pay to read Nic’s articles because if we did i think he would soon be very very poor. Try putting your articles on a pay per view site Nic and then see how many say ‘i can read this gibberish for free elsewhere’ but i am sure you would equally contest that the other writers dont have your expertise and knowledge as you!!!

  31. It is clear you need advice. I would say an hour or two with an adviser would be beneficial. You could agree an hourly rate with an adviser of around £100 to £150 per hour (usually plus VAT). What’s the issue?

  32. MM, where’s the unsubscribe button…?

  33. @Philip Castle: You can rest easy: if I needed advice, it wouldn’t be you I go to. BTW, I already had an adviser in place able to effect this transaction for a fee both his firm and I regard as satisfactory and, contrary to other assumptions (@ Phil Sipocz) I don’t take this forum as remotely indicative of widespread IFA opinion as to my status as a potential client. My email inbox in the past six hours, with advisers queuing up to offer their services, bears that out.

    @Nick Bamford: you asked a few questions. I won’t answer them in public but I had considered the majority of them. The funds are temporarily in cash in anticipation of an imminent switch to a CRA, I have appropriate life cover in place of 6 times income. My income can sustain repayment of the increased mortgage, which even when back to its original level will still only represent 8% of the home’s value (without the extension).

    I’m not looking for a direct replacement to the foregone income from the pension. My calculation involved an acknowledgement of the direct loss of some £1.5-£2k pa income from that lump sum.

    That said, the nature of the building work involved will offer us the opportunity of an alternative income stream. Given that the building work would be incomplete without the lump sum, not accessing the funds would mean the project itself and therefore the planned income stream would not happen.

    As well as that, I am anticipating additional income streams that will keep my income tax liability over the 40% mark after retirement: the ISA option allows me to shelter some future income from tax. My ISAs, several of them self-selected, are performing well. The IHT issues have also been considered.

    As I say, the point of my column was not to tout for either advice or for an adviser but to discuss how the industry and IFAs should begin to tailor their services in a way that focuses on client needs rather than their own. Some readers are clearly more receptive to this argument than others.

    Oh, and @Philip Castle again: Mrs C reads all my columns and, as a qualified psychotherapist, often wonders about the mental state of those responding to my column.

  34. @Victor M: the unsubscribe button you need is at the front of your head, looking at this page. If you don’t like what you read – stop reading.

  35. Agree very largely with Nic’s points about own actions.

    But the main problem is liability I think from a providers aspect. Nic says “and in a paper with a mass circulation within the industry to boot, the issue of me being able to make a complaint with even the remotest chance of success would be infinitesimal anyway”. Seems a fair point – but I recall that some providers still had to pay compensation under the pensions review, to some of their own authorised financial advisers who did their own personal transfers execution only. I beleive it was claimed they weren’t trained sufficently so didn’t know what they were doing and shouldn’t have been allowed etc etc.

    Perhaps it needs the industry and the powers that be to recognise a tighter form of execution only, rather then the current arrangements which seem to be built on somewhat shifting sands.

  36. “Mrs C reads all my columns and, as a qualified psychotherapist, often wonders about the mental state of those responding to my column”

    She’s not the only one.

    I frequently wonder about my mental state….I probably need to do something else!

  37. @Nic Cicutti

    Really?????

    More fool them!!!!!

  38. I wonder whether what we have here is a back-book problem, with Nics pension held on the venerable ” old ” Skandia platform, whilst the functionality he desires is only available from the Collective Retirement Account on the “new” Selestia platform.

    To get from one to the other involves a pension transfer. Many providers will not accept execution only transfers and I can see no good reason for Smandia to do so.

    Hey Ho

  39. @ Chipping – it’s not the regulations that need to change it is the FOS!!!

    I dont think many IFA’s are really worried about the regulations, they know them, they know how to work within them, but when the FOS completely ignore them (and the Law) and dont understand them then that is where the problem lies!

    And what happened to Nic today? Tried touching a nerve and touched your own? Not often you feel the need to respond to your own articles and even rarer you get so personal!!! Hmmm, me thinks the journo duth protest too much!

  40. Sorry. Not Smandia, Skandia.

  41. Have I missed something here?

    The title of the article is ‘why can’t advice be charged on a case-by-case basis?’. Nic then proceeds to explain what he wants to do, which to me sounds very much like pure execution only business, i.e. non-advised. The fee that he quotes seems a little high for execution only business and this appears to be confirmed by Nic’s comments, as he has obviously found an adviser that has agreed, presumably, to charge him less than this.

    If Nic is generally raising the issue of case by case advice and not just relating it to his non-advised requirement, is this not available widely already? The service that I offer is, effectively, split between the initial work and any ongoing service. The client is not obliged to take the ongoing service if he uses me for the initial work (although the advice might be slightly different if he isn’t taking the ongoing advice).

    However, if I was to provide ADVICE to someone in relation to the scenario that Nic proposes I think that £1,500 would be very reasonable fee for doing so. It must be remembered that by giving advice we, as advisers, are responsible for the advice that we give. We cannot just accept what a client wants to do and go ahead blindly without exploring the situation further. In addition, there is significant work involved in carrying out the research, producing a comprehensive written report and arranging for the transfer in a timely and efficient manner (not to mention any lifestyle financial planning that we might be doing).

    It is clear to me that the article above is anything but clear. It seems to be confusing a number of issues and the headline doesn’t really relate correctly to what is in the article.

    As for the approach that Nic is proposing to take with his personal finances, I would concur with a lot of the points that Nick Bamford has made. Although Nic says he has considered all of these I am a little unconvinced by this, particularly in light of the change regarding his taxpayer status (although I do appreciate he is talking about a future change).

    Final point – Nic seems to put forward the argument that his self-selected ISAs are performing well as one of the reasons for not accessing these funds. I do not feel that this makes much sense. I guess I do not know the exact situation but I would have thought the investment strategy within his ISAs could easily be replicated within a Skandia pension arrangement (or alternative one for that matter) and allow him to retain the benefits of a tax advantaged uncrystallised pension arrangement.

  42. Steve, the only thing I think you missed is that Nic continues to obtain free Independent Advice.

    You have some very valid points and between you and Nick Bamford have provided Nic with some good financial planning ideas that will probably make Nic think again before he acts… and he has obtained it free of charge!

  43. Presumably you are building your own extension and renovating the house after the fire, after all anyone can lay a few bricks can’t they?

    No? didn’t think so……..

  44. The article asks a question about how advice is paid for – not the amount, nor whether advice is worth is worth paying for. If anything the question about case-by case payment implies that paying for advice is a good idea.

    I can understand why an adviser or salesperson might want to be paid on an ongoing basis. It makes life easier, cash flow more certain, builds up health fee amounts ( without being too obvious) but is this the best way for an investor to pay ? I’m not so sure. For some perhaps but for many why continue to pay in the times where quite frankly little or nothing is happening. Activity for its own sake on the part of the adviser is not what an investor really wants. So I can see why case by case advice might make sense for many. Hopefully more advisers will see it this way and be quite happy to advise the D2C investor as and when needed.

  45. Bones, I don’t think many advisers have a problem in providing Ad hoc advice… Please do tell me if I am wrong? It is the less experienced client, or those to busy to afford the time themselves that need the ongoing support and are happy that they pay for it, either directly or via deduction from provider… well that is my personal experience. Not forgetting of course they hook up to the knowledge and skills built up over many years by their adviser! I think Nic has learned something from this thread to realise that while he thinks he knows what to do and how to do it, there is probably a better option that suits his personal circumstances…

    I have over the years obtained several clients that used to think they could DIY and some did so quite successfully at outset, when their mind was on it and they had the time to afford the concentration, but later found they could no longer cope, either had suffered losses bigger than expected (poor assessment of their own ATR), or apathy crept in and they simply didn’t give it the attention it needed.

    I am very happy for individuals to DIY, but don’t think the industry should bail them out if they get it wrong. My business can and does operate to provide Ad hoc advice, or on an on-going basis with an agreed client proposition in place. 98% of my business is conducted on the latter…

    Strangely and again by personal experience, the issue over transparency and charges comes from within the industry and not from the consumer. But as the media continues to discuss and debate it consumers are becoming more aware to the extent that they will often consider charges as a priority over performance and support. One client made the point at his annual review that he had paid a TER of 1.69% but hadn’t realised his portfolio had grown by 12.3% net of charges… I tongue in cheek made the point that he could pay nothing in charges and stick it in the bank and maybe get 2% if he was lucky…

    Have a good weekend one and all…!

  46. Contractually anon 8th August 2014 at 4:52 pm

    Whilst I don’t agree with everything that Nic say’s, the points raised in the article are valid. I’d like to offer another example.

    In 2004, I moved six years final salary pension to my L&G stakeholder (I appreciate that sounds bonkers but I can assure you there were good reasons for doing it including stupidly low CY, the scheme assumptions were about to be toughened up, charges on the L&G scheme stupidly low, my age and PRA against scheme NRA etc). As someone who knew a reasonable amount about pensions (pre G60)and not wanting to lose some of my fund to fees, I undertook this execution only after jumping a few L&G hoops.

    In 2014, my understanding is that even as a G60 qualified industry professional, I would not have been able to take this course of action with L&G and would have to take advice and be charged accordingly. I have no problem paying for advice when I need it and I understand the overheads that make charges ‘high’. However, I don’t want to pay the costs of covering an advisor’s back whilst they send a form off for me.

    As an aside, I very much doubt in the circumstances described by Nic that an ombudsman would find that advice had been given not that I’m the ombudsman’s biggest fan. However a case could fail on a dereliction of duty of care or (probably more likely) basic admin errors causing a disadvantage. If I am incorrect and there are examples, I’d love a link to the published decision (purely because I’m nosy and not a vested interest).

  47. Could you consider using the isa funds before using the pension funds. That would work better for iht. It would allow the pension fund to grow (hopefully) and create a larger pcls in the future maximising the 25%.

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