Insistent client numbers set to soar

If you put ‘more insistent clients’ on your list to Santa Claus, then the government has delivered an early Christmas present for you.

Details of what the government will require of you, when it comes to advising those who feel a lump sum is more appealing than a regular income, are unsurprisingly few and far between at this stage.

What has been tabled is an amendment for mandatory advice for those with higher value annuities through the Bank of England and Financial Services Bill.

This will compel the Financial Conduct Authority to make rules requiring certain authorised entities to check that holders of a relevant annuity have received appropriate financial advice before they sell their annuity.

The legislation will provide HM Treasury with delegated powers to determine what a ‘relevant annuity’ is, including what the threshold should be, how it should be calculated, and whether it should take into account an individual’s circumstances.

If you put ‘more insistent clients’ on your list to Santa Claus, then the government has delivered an early Christmas present for you.

The Treasury will also be delegated powers to specify what is meant by appropriate financial advice.

For all we know – and given chancellor George Osborne’s past failure to grasp the difference – ‘advice’ may well mean ‘guidance’.

However, given the current rules surrounding pension transfers, I doubt this amendment will not mean proper advice – the kind only you can give – must be dished out to people who want to sell their annuity and don’t really want to be A) turned away by you, B) charged by you, or C) told they are wrong to want to take this course of action.

This requirement will just create even more insistent clients – the persistent kind – and yet more prey for pension fraudsters.

I can see the text messages, emails and imagine the cold calls from dodgy pension liberation fraudsters now.

“Would you prefer £100 a month or at least a four figure sum in your pocket today? Don’t delay. Speak to our advisers now and ditch your rubbish annuity.”

As with insistent clients and pension transfers, you have to wonder how many people will end up having to pay for advice, only to be told they are better off sticking with a steady monthly income, rather than trading it in for a lump sum?

How many people will be satisfied when the answer given by an adviser is “you should stick with your annuity and give up on that dream of an around the world cruise”?

These insistent clients have been sold a dream of pension freedom by the government. The next big mis-selling scandal after payment protection insurance has been set in motion – and again it looks like you will be picking up the compensation bill.

How many insistent clients will end up complaining to the Financial Ombudsman Service or falling prey to pension fraudsters who promise they can return their cash, instead of having to ‘suffer’ a slow drip feed from an insurer?

Undoubtedly it is only right and sensible that those who want to ditch a guaranteed income for life for a lump sum should get advice from a well informed, highly qualified adviser.

The reality is though, there just aren’t enough of you to give this advice and regulation has made it impossible to bestow your wisdom on the average member of the public at a price they can easily afford.

I fear advisers will be painted by the government as the villains of pension freedom who refuse to help insistent clients.

emma.hughes@ft.com