SMALLWOOD'S SHOUT for IFA Online - 'No room for advice defecits'
With news that one in five complaints received by the Pensions Ombudsman are attributed to pension transfers and that this number has doubled since 2007-08, it means that yet again the issues surrounding what constitutes sensible pension advice have come to the fore. And, for many investors already caught up in company schemes with large deficits, the question of whether to stay put or look at transferring out is a very emotive one.
The message from the FSA, as the primary pensions Regulator, is that the focus should be on ensuring higher standards of advice are maintained, but with resources already under full stretch, the simple fact is that there are far too many directly regulated, smaller adviser firms still operating 'under the radar' and doing financially lucrative pension transfer business without sufficient regulatory supervision. This is set to be the industry's next big scandal and it could well be a very painful one indeed.
So despite pension roadshows, offers of further training and other encouraging support being offered by the FSA, the simple fact is that much of this effort has come too little and too late. One would have hoped that with the lessons of AWD, a major IFA firm which faced an equally major size fine, most advisers would by now have realised the importance of ensuring all past and present transfer case are rigorously checked to ensure they involved accurate and completely regulated advice. Sadly, this is far from the reality.
With company pension scheme deficits also soaring, advisers now face the added pressures of dealing with clients often in very distressed situations. The options now available to many company pension scheme members seem more complex and troublesome; for many the stakes are now that much higher and jumping ship from current schemes which appear to be in trouble often appears to be the easiest option.
However, moving from these pension schemes can be an even more damaging path to consider. For this reason, these kind of transfer cases require very specialist advice and even for an experienced IFA, the ability to refer to a specialist regulatory resource, ideally with chartered expertise, can be not only reassuring but also the best means of ensuring rigid compliance adherence.
As IFAs, we must understand that about above all we have a duty to ensure our clients are in possession of all the relevant facts information to be able to then make a properly informed decision in the full knowledge of the potential impact on their future retirement income.
In the broader pension and retirement planning markets however, it is encouraging to see some efforts are being made to tighten up regulatory controls and not just from the distributor viewpoint. One report recently stated that the Regulator is now conducting a review of around 70 SIPP providers, to assess whether they are adhering to its principles and rules. The IPS Partnership, a SIPP and SSAS provider, should indeed be applauded for its call to ensure IFAs undertake extra due diligence on any product provider they recommend to their clients.
According to this Firm, over 20 per cent of more than 1,000 IFAs contacted by IPS have asked for further guidance on the nature of the due diligence required when assessing a SIPP provider, despite the fact SIPPS regulation came into force over two years back.
IPS is now offering any IFA that has introduced business to the firm, or is thinking of doing so, a comprehensive due diligence pack covering all the information gathering expectations of the FSA, including a checklist. This is clearly welcome news but surely more has to be done by more providers if IFAs are going to be better informed and protected - which ultimately ensures clients receive the best advice possible.
*Reproduced courtesy of IFA Online