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The bin issue

Simple is often the best, a phrase that could hardly apply to some of the financial products now displaying terminal problems.

When the first structured products arrived, I put them to my “10 minute bin test”. This is where I read the material, then if in under 10 minutes I can explain its risk in 30 words or less, I keep going. Otherwise it is the bin for it. One regulator said to me that if more advisers only sold what they understood, then there would be far less inappropriate sales of product.

Qrops are an excellent example of a solution where any thing less than full research can leave you and your client facing an uncertain future.

The Personal Finance Society has set up a working party to try and ensure that clarity in all Qrops matters is brought to the fore.

For example, there are American schemes on the Qrops list but they can’t take transfers at present. They are there due to the other aspect of this approval, tax relief on employers’ contributions.

Qrops are not just about the transfer. There is the tax regime of the country the client is moving to and that is as important as their ability to leave this one.

Qrops, however, need to be considered by all of us and then if they are a potential option, handing power to a more informed professional is to be recommended, especially as many PI policies will exclude advice to foreign nationals.

The raising of the benchmark to diploma level will contribute to products being better understood and greater use of quality risk tools such as those which use psychometric testing.

The positive effect of this recent market will be that clients may now start to pay attention to what is being said and this will increase the clamour for statements that inform rather than most which simply discharge the duty under regulation, that is, chocolate teapot variety.

Recently I was delighted to find that one Sipp provider, Suffolk Life, had produced a truly user-friendly statement and seems to have got it right. Other non-insurance company Sipps need to take heed if they are to prosper.

Amazingly enough, the ABI stood down its standing committee on statements just after these very statements had been slated in the last year’s Dalbar survey on personal pensions and investment bonds.

The ABI’s strategic vision continues to be set with the consumer nowhere in sight and the sooner the life companies abandon this organisation the better. It is out of date, out of touch and resembles a former East European communist government rather than the dynamic organisation it needs to be.

To leave you with a smile, I recently found out that Pada are going to use direct debits and not the PAYE system to collect personal account contributions. This is an accident waiting to happen and would have a good chance of sending their call centre into meltdown.

I don’t think 2012 has a remote chance of seeing personal accounts launched. The scale of interaction with the contributors has been ignored and they will regret the lack of industry input.

I remember Paul Bradshaw saying of with-profits (the original structured product?): “I was there for their teenage years, with-profits, that is, I intend to be at their funeral.” If you ask me, I can smell the flowers for opaque complicated products generally. Lets just hope that for them there is no afterlife.

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