When one of our clients dies and they have annuities in payment that we did not organise, we seek evidence of conscious purchase where an annuity on a single life basis is in place.
Currently we have an ongoing battle with a major insurer whose handling of the complaint has been inept at best and at worst plain stupid.
On two occasions they have committed to settle, their offer made by one of their senior sales managers then retracted, at the insistence of their compliance team.
They have no record of the conversation; no time line of issuing docs and use a series of terms for the same benefit which only serves to confuse.
The root cause in this case is the habit of providers (fellow sheep) to quote on a single life basis; if they were to quote on a joint life basis then this could have been avoided.
Like it or not when you offer four options and none of them include joint life you are asking for trouble.
To refer on the options form and the key features to spouses pension and dependents pension as if they are interchangeable leads to confusion. To have no proof that either was issued or received shows the danger of packs that are a series of forms and not a single set.
I have some suggestions that could be put into place immediately which would remedy the situation:
- Wake up packs should talk about clients leaving to take OMO as the default
- Omo acronym to be replaced by a more client friendly phrase, for example “shop for annuity”
- Period of reflection, say 30 days
- Issue Omo option packs with joint life as the default
- Validate decisions with client feeding back
- Companies should stop referrals to a single annuity provider
- Adviser referrals should only be to those offering whole of market – no panels
- The FCA should set benchmarks for the non-advised process and should encourage taking advice.
- This is the area where simplified advice could work at its optimum.
As I stated in a previous column, we use the combined enhanced form completed for all clients at retirement by an external resource that uses medical professionals to pose the questions.
The claim chasers are already eyeing the annuity market as easy meat and advisers need a prescribed and detailed process if they are to demonstrate the right advice was given.
All of this will become somewhat academic when all annuities are underwritten and the tipping point has been reached where investment risk has more appeal/potential than a fixed annuity.
Also for those with larger amounts at retirement, an annuity is not the only solution and a mix will in many cases deliver the better result and accommodate the options needed.
Back to my client, it is now over 12 months since we made the enquiries and the time spent by me and by the provider must now dwarf the cost of settlement – proving a complete absence of pragmatism.
I have a deadline of the end of February to have an agreed appointment with their CEO. If that meeting does not take us forward then I will need to go public given the media interest in all things annuity. In the long term the ostrich approach by this compliance team could cost them dear , not just my custom but that of my fellow professionals.
Culture is the most important element of a regulated firm’s structure, its absence leads to an absence of client facing strategy with real intent.
People have criticised the FCA for the lack of positive action but the actions I have suggested are a great start and some proactivity from providers would be no bad thing.
Robert Reid is managing director at Syndaxi Chartered Financial Planners