Several high-profile peers responded to calls for new long-term care legislation to enshrine referrals to regulated advisers by citing a range of advice shortcomings, including prohibitive costs and advisers lacking knowledge and prioritising selling products.
In a debate at the House of Lords, Baroness Greengross called for local governments to establish a service which would refer people to advisers for long-term care planning and specifically recommended individuals be referred to members of the Society of Later Life Advisers.
Baroness Brinton echoed the concern over a lack of advice, pointing out that of 53,000 self-funders only 7,000 received financial advice in 2009 and that one in four ended up running out of money and seeking government help.
However, while a number of peers praised adviser members of SOLLA, whose president Lord Lipsey opened the debate yesterday evening (26 February), several poured scorn on suggestions that the Care Bill should place more focus on advice referrals.
Lord Lipsey himself said: “I am not convinced that the standards required of independent financial advisers operating in this [long term care] field are sufficiently high. Too many advisers sell too much on the basis of too little knowledge. The standards are simply not high enough.”
He added that fear of liability contributes to advisers’ reluctance to commit to long-term care business in such a way as to ensure standards were sufficiently high.
“There is something in the industry that I would call the fear of [the Financial Ombudsman Service]. Many advisers who could play a very useful role for society and themselves by getting into this business are frightened that, although they sell the policies reasonably honestly, they will be found to have mis-sold them by Fos and will be forced to pay huge amounts in compensation.
“This is something the government need to look at, to see if any reassurance can be provided if we are to have the advisers available to provide the advice that people need.”
Lord Browne of Ladyton emphasised the high cost of advice, stating that the majority of people do not retain advisers or accountants because a “one-off appointment would be... equivalent to a week’s take-home pay for workers on average wage.”
He added: “As for opaque charges, brokers are incentivised to sell particular products; in some cases they make 6 per cent, or £12,000, on a pot of £200,000. There are sharp practices with brokers shopping around, resulting in a referral fee from each.
“Many also have exploitative pricing; that is, they have sold a product for a fit person when they are not fit, or an adviser neglects to tell people of other products such as income drawdown because the profit margins are slimmer.”
Baroness Gardner of Parkes called for a “free, independent advice service” run by trained and capable staff, prompting Lord Browne to respond that individuals already have access to free “information and guidance” from the Money Advice Service and Pensions Advisory Service.
The Association of Professional Financial Advisers previously (24 December) told FTAdviser it planned to lobby local authorities this year to bolster the number of care referrals made to advisers.