Pensions  

IFAs wary of new pension product debate

IFAs wary of new pension product debate

Why should advisers recommend a new type of pension product without a limit to the liability on advice?

This was a question posed to a panel of experts at the FTAdviser Retirement Freedoms Forum in Manchester on 22 September.

Martin Kendrick, of Longton Financial Services, said: “I have got to an age where I do not want to think about getting to understand and recommend a brand new type of pension product.

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“Why, with the lack of a long stop on the liability attached to advice, would I consider recommending a new product and retire, having a risk hanging over me that, in a few years’ time, the regulator will retrospectively decide that such new hybrid models were not fit for purpose?

“How can any adviser cope with that?”

The panel, to whom his question was directed, comprised John Moret, ‘Mr Sipp’, founder of MoretoSipps, Henry Tapper, director of First Actuarial and founder of the Pension Playpen; Mark Rimmer, product director, multi-asset funds, for Premier Asset Management; and Peter Ellis, director of customer propositions, for Just Retirement.

Mr Moret said he sympathised with Mr Kendrick’s view. He said that people liked using default options because it reduces the risk attached to something new, but said the default option was an annuity, whose “brand has been damaged”.

“What we need is a new form of product that is simple, one that provides security of income, has appropriate flexibility and perhaps some form of longevity insurance.

“But as for the liability, I do not know how to deal with that. Yes products can be created to be simple and help people but we do work in a regulatory framework that is obsessed by risk, and caveat emptor as a principle has gone out of the window”.

Mr Tapper said advisers should take some responsibility for helping to clean up the industry and throw out the cheats. “Yes we need good products but we must ban the cheats. We must not give bad life companies and banks a second chance to rip off our customers”, he said.

It was a tough note for the product providers on the panel to follow, but Mr Ellis assured that not all providers were cheats and that was not necessarily the right way for people to think of the industry.

He said: “we must develop propositions that advisers can recommend, ones where we have taken care to know our customers inside out”.

His comments were backed by Mr Rimmer, who said: “I do not think we necessarily need to rethink all the products that are out there. For many people, existing products such as multi-asset portfolios, with their established track record, can be a useful way of investing for the long-term.

“Investing in a multi-asset portfolio on platform could be combined with some form of drawdown or longevity product as part of an overall proposition that can be flexible, provide robust income and deliver some degree of stability for consumers”.