I consider myself a true financial planner, who only provides recommendations to clients once I have determined their objectives and completed a cash flow analysis. To me, this is the best way of ensuring that clients achieve their goals.
True, you make certain assumptions about inflation, growth and some expenditure, but provided the client is happy and the plans are reviewed regularly – at least once a year – to ensure they are on track, it can be a reliable activity. Having based my career of 28 years and my clients’ futures on the six-step process of financial planning, I remain convinced of its method and outcomes.
The same goes for defined benefit (DB) pensions and assessing suitability to transfer. While critical yields, hurdle rates and general analysis are all well and good, having a good understanding and documenting what someone is trying to achieve is paramount. Modelling the options available to them is equally sound. At least then the client is clear as to what impact each option has on their future lifestyle and can make an intelligent decision about going forward.
This process is time consuming and needs the whole team to be involved, so naturally IFAs charge a hefty fee up front for the completion of the cash flow and transfer value analysis (TVAS) reports. There must also be a signature on the letter of engagement, making it clear that if the IFA does not recommend a transfer, the fee must be paid.
Uniq Family Wealth was approached by several British Steel workers to review their pensions. Many balked at the fee and went elsewhere, having been promised no charge until the transfer was implemented and swayed by past performance figures. One worker I met with was seeing six IFAs. When asked how he would make his decision as to which adviser to choose, he seemed unsurprisingly perplexed.
Too many advisers leaped too quickly into this arena and are now paying the price, along with the clients who, in the long run, will pay a heftier price than mine would have been. I would also have given them sound advice.
Marlene Outrim is managing director of Uniq Family Wealth