Here is where I get confused about financial advisers. On the one hand there is a vociferous group who say they would not touch a defined benefit pension transfer with a bargepole.
“No way! Not me guv! That dirty devious Ombudsman is out to get us.”
But then there are others who undertake the transfers using a business model that leaves them open to accusations of bias and greed.
Defined benefit transfers with sometimes huge sums involved offer potentially very lucrative business with adherent risk to both adviser and client. How they are handled is vital to the reputation and integrity of the sector.
Defined benefit transfers offer potentially very lucrative businessXafinity suggests average transfer values are running at a little over 24 times annual salary. Personally I would see that as a pretty poor offer for giving up an inflation-linked guaranteed pension with widow’s benefits.
But there might be some tempted at even these levels because of personal circumstances, such as terminal illness.
Royal London says the values it is seeing are a slightly more tempting 25 to 30 times annual salary. Some financial advisers have reported offers of up to 40 times salary – and at this level I can see why the pound signs are dancing in front of clients’ eyes.
But it is a complex decision with tax, investment and lifestyle implications.
The variables that do not need to be thrown into the pot are contingency charging – which amounts to no buy, no fee – and percentage charging.
Both provide a clear incentive to the adviser to tie up a deal. No matter how carefully and scrupulously the work is done, if the adviser only gets the bulk of their money when the client proceeds, there will be a question mark over that advice.
Percentage charging on such deals is a connected issue. How much more work is involved in transferring a £600,000 pension than a £300,000 one?
If I were ever in a position to need such help I would want to pay by the hour and be certain the lure of “commission” was not influencing the advice.
Think of it this way: should this industry be striving for the ethics of lawyers and accountants or those of estate agents?
Regulators are watching – please do not turn this into the next financial scandal.
Bad behaviour
At last someone has been charged over a financial scandal. I am not going to comment on Barclays and four former executives being charged in connection with behaviour during the 2008 financial crisis.
Instead let us consider how as individuals bankers and others in the financial world so often seem to be immune to any form of statutory sanction no matter how much financial misery and hardship they cause.
If someone on the high street picks my pocket they can be fined or go to jail.
We have seen one financial scandal after another where banks and other institutions have been fined, but no action has been taken against the individuals who devised the schemes or created the messes.
PPI, pensions mis-selling and shifting risk-averse investors into high-risk investments – the list goes on. Individuals – usually trusting and not financially astute – have been fleeced of thousands of pounds.
Self-employed mortgage brokers are fined heavily for misdemeanours, but devising a scheme to make people pay thousands for insurance they do not need is without consequences – as long as you work for a bank or insurance company.
Funny old world isn’t it?
Welcome back to private banking
What’s the value of a private banker these days? £250,000 a year it would seem. That is how much you need to earn to qualify for Santander Private. Alternatively you would need assets of more than £500,000.
Apparently the move into private banking has been driven by a strong demand from clients.
I suppose I should welcome it back to world of wealth management. Let us hope they do better than before when it closed its investment business after being fined £12.4m in 2014 for a series of failures in the advice process.
Tony Hazell writes for the Daily Mail's Money Mail section
