Pension Charges – why we should all care

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The debate on pensions charges is in danger of becoming a political football where decisions are more about trumping ‘the other lot’ than they are about the interests of people saving in pensions.

On the one hand, I am hugely sympathetic with the argument that pensions charges have been excessive and that investors simply have not had a fair deal in the past. This is even more important when the choice of a company scheme lies in the hands of the company not the individual investor.

Research published by the Pensions Policy Institute showed that charges can make a huge difference in the final amount of cash available for retirement.

Treating members fairly

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Well, there’s plenty going on in our little sector at the moment. In a matter of weeks we have seen Aegon sell Positive Solutions to Intrinsic in return for some shares and Sesame confess they’re going restricted in 2014. The latest to hit the news over recent days is Russell Investments’ acquisition of On Line Partnership. All exciting stuff!

Unless, of course, you happen to be one of the affected members thrust into that disconcerting ‘limbo’ phase. Trying to find out information from people who don’t know, or can’t say. Trying to second guess what it all means and how to steer a course through impending changes can damage your business. Disturbance and distraction are rarely welcome visitors.

Is simple and fair pricing possible?

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Like most people, I want to know that I’m paying a fair price for what I’m getting. But pricing is not always fair or simple. Often it’s one or the other, but can it be both?

Pricing up a car

Most markets have different ways for building up the costs for a customer.

Take buying a new car, where you tend to get a base price, which varies depending on the make and model of the car.

Walking away from responsibilities

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When the FSA published its Policy Statement on legacy assets, it ignored the warnings of the providers about the costs of amending legacy products to be able to accept adviser charging or increments.

As a consequence, RDR Steering Committees in every product provider had to face the harsh reality of whether or not they could justify spending money to alter products knowing that there was no financial case for doing so.

Today, the advice sector is paying for these decisions in a new layer of complexity when giving advice on legacy products.

Sales Incentives – why did it take so long?

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The FSA has conducted a review of incentive arrangements and now indicated, in the strongest possible terms, that it intends to take action to ensure that incentive schemes do not result in customers being treated unfairly.

For me, it is astounding that this “revelation” has taken so long to dawn upon the FSA. Back in the 1990s, I worked in a major bank and was involved in designing a new incentive scheme to drive mortgage sales. That scheme contained all of the “flaws” identified by FSA, including thresholds, multipliers based upon associated product sales and “cliff edge” style features. There was a debate about the concept of adding in a sales quality measure but this was roundly rejected by senior management as being too difficult to measure and not motivational to the staff involved.

The triumph of the Olympics

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Only 6 weeks ago, the media was filled with cynical stories predicting disaster at the Olympics. Transport would fail, Team GB could never match Beijing and the £9.2bn cost was a waste of money. The first sign that the public didn’t share these views was the flood of complaints at the negative BBC interviews of...

The search for yield

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One of the biggest risks that advisers face is the client who is seeking the perfect solution. They want a better return but the unstated belief that this can be done with no risk to their capital. I started my career in financial services over 30 years ago and virtually every scandal has had, at its very heart, the greed of some consumers to grab high returns but to conveniently ignore or forget the risk that they are taking.

When faced with the client who demands “higher” returns, some advisers have resorted to recommending products/solutions which they themselves would never buy or which, put simply, they just do not understand.

Herding Cats

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Just how do you get a few hundred self-employed IFAs to do the same thing? This is the conundrum facing the traditional national IFA model in which advisers have been given, over the years, freedom to express themselves in choosing investment vehicles. And it’s a big one.