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Nick Bamford: Time for a systems and processes check up

Nick Bamford MM 700

Good advisory businesses typically operate with consistent systems and processes that enable them to produce bespoke outcomes for clients. Starting from scratch each time to deliver advice and allowing individuals in the firm to be left to their own devices to determine how to deliver such advice seems like a recipe for disaster.

In light of the changes to the way in which people can access their pension pots, a pertinent question for advisory business owners might be: do you need to change any of your systems and processes to ensure best advice and best outcomes for clients?

We have some new terminology to introduce into suitability reports and letters (flexi-access drawdown and uncrystallised pension fund lump sums, for example) and we may need to challenge conventional thinking around such things as the best way to generate sustainable retirement income. For the client with various tax wrappers and sources of income, in what order should income be taken to get the best net result both now and in the future?

For example, now that pension pot death benefits are so tax attractive from an estate planning perspective, where in the pecking order does taking benefits from such pots come?

I suspect there will be some software development going on in certain quarters to do the somewhat complex calculations around this subject, with client data being dropped in at one end and various income tax scenarios flagged up at the other.

If the advisory firm uses checklists they will need to be reviewed to ensure they prevent the “dumb stuff” happening (read The Checklist Manifesto – How to Get Things Right by Atul Gawande for a great insight into how checklists work).

It is probably very much worth a review of our “know your customer” forms to make sure the questions we ask remain appropriate and are recorded and applied to the advice we provide.

The very late delivery of practice notes from HMRC about how withdrawals will be taxed is also going to test best practice. How quickly are clients going to be able to reclaim excessive income tax deducted from their pension pot withdrawals?

I suspect pension pot clients are going to need an enormous amount of hand holding to enable them to only pay the tax they should be paying. Our systems and processes are going to have to ensure they complete reclaim forms as part of the application process

Early signs are that the product providers have not rushed to get their systems and processes in place and tested, so it follows the adviser is going to have to pick up that dropped ball and run with it for their clients benefit.

The FCA has indicated it is going to be reviewing pensions advice post-freedom and choice changes, so creating and implementing diligent systems and processes now might well save some future embarrassment.

Nick Bamford is executive director at Informed Choice 

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