If investment advisers can keep their heads while all around are losing theirs, then they can prosper from the pension reforms.
It may well feel that Rudyard Kipling’s poem is highly appropriate come April. National newspapers are waking up to the risks of the reforms, though I’m not quite sure they’ve got those risks in the right order yet.
A few newspaper reports are concerned that people will simply not be able to access the pension money they want. Some intermediaries I have spoken to, while not wanting the headache of admin problems for their own clients, privately suggest a little delay might not hurt because it might see people pause for thought.
Even the pension minister Steve Webb in an interview with Financial Adviser wants providers, before they release cash, to consider steering pension investors away from rash actions, or at least ask some pertinent questions without straying into advice.
Advisers should probably take it as a given that many providers, quite understandably, will not be fully ready to meet all the demands of the reforms. In addition, concerns about guidance or, as it is now called, ‘Pension Wise’, are mounting. Tony Hazell in Financial Adviser recently compared the potential 300 new recruits of Pension Wise to the 300 Spartans at Thermopylae, with about as much chance of victory (and less vigorous training).
Face-to-face advice in particular is going to be difficult to deliver. That is before we consider the big hazards, including the return – if they ever really went away – of toxic Ucis schemes with varying degrees of toxicity looking to scoop up that pension cash.
A few may have hoped the FCA would ride to the rescue with its clarification of the boundaries to retail investment advice. Well, in the guidance we have a better statement around focused advice, with, on my reading, less confusion about whether advice needs to be offered beyond the matter in focus – only if the information is thrown up as a result of the focused advice. This is a small but not insignificant improvement.
But there is very little here on automated or simplified advice that would allow advisers to move further down the market in any meaningful way. The EU concept of a personal recommendation and the domestic definition of regulated advice don’t help with clarity. Advisers, to all intents and purposes, still face the same liability for providing a more limited or automated service. The Fos still looms over all possible channels outside of execution only.
Some consumer journalists might suggest that this is special pleading from advisers hoping to provide a shoddier service. It is, of course, nothing of the sort. It is simply advisers wanting to operate in this market, but worrying about the financials, the Fos and their PI bill in five years’ time.
So what about keeping your head and winning posthumous praise from Rudyard? Well, it seems to be a case of stubbornly concentrating on your clients unless you have a very strong idea of what you’re offering beyond that base and have done all the necessary compliance donkey work.