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This year&#39s best practice model

The CII&#39s Society of Fellows invited me to lead a group to carry out a research report examining the retirement planning market in terms of available products and how they are used and in relation to what constitutes best practice for financial advice.

Also in the group are John Flynn of IFA Helm Godfrey, John Pyeburn of Scottish Mutual and Tony Lumsden of Abbey National Benefit Consultants.

My personal view may not be quite that of the CII but it is the institute&#39s pol-icy to publish the views of its members and research groups.

The full report will be published on October 23 and will highlight the complex issues involved in retirement planning today.

It will make a series of major recommendations, in particular, a best practice model which the group hopes can be developed to enable consumers, advisers and providers to maximise the very real benefits that today&#39s legislative flexibility offers.

The best practice model is designed to deliver the highest possible protection to consumers in a way that does not stifle genuine initiative or impose significant extra costs which the consumer would end up having to fund.

It is the hope of the group that consumers, advisers and providers will be comfortable with this approach.

Of key importance in the model is that advisers must have proven competence in this specialised field. Advisers must have competency in two key areas. First, in the area of taxation to allow a holistic view of a client&#39s affairs to be taken and, second, in the area of pension rules at retirement.

The model then goes on to recommend the process by which an adviser should carry out the advice process with additional specific recomm-endation for income fund withdrawal.

The CII has just launched two half-credit Advanced Financial Planning Certificate papers which will be particularly helpful to advisers. The papers – Retirement options and Pension investment options – will be examined for the first time in 2001.

Sofa, the CII&#39s financial services arm, also runs a range of CPD seminars to ensure advisers keep up to date.

Clients need to understand fully the implications of taking an alternative approach to a “one-shot” annuity bought on retirement, while a thorough fact-find must form the basis of any advice given.

The alternative of a drawdown pension requires an ongoing and high level of investment advice. Where that advice is not available, advisers should seek appropriate advice themselves from a suitably qualified and experienced source.

The best practice model also proposes that a regular review of the client&#39s income and expenditure should be undertaken.

There should also not be incentives that might create a bias towards income drawdown in the form of higher initial commission payable to advisers by providers of such schemes.

Where clients elect totake income drawdown, they should not be locked in to the investment performance of any one provider. The model also points out that providers and advisers should recognise that any renewal commission payable is a reward for ongoing advice and not for past service.

Finally, the FSA should consider the necessary level of competence required by advisers in this area.

The retirement market is set to grow substantially and the industry should consider the ways in which it deals with its clients – establishing both an open and honest approach together with best practice.

It is the hope of the group that the best practice model will now be picked up and debated by the industry and ultimately practised.

The executive summary is available free from the CII and the full report costs £40 for members and £60 for non-members. Anyone requiring a copy should contact Nicola Lines at the CII on 020 7417 4441.


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