PensionsMar 15 2017

L&G tells IFA's client to go to Pension Wise

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L&G tells IFA's client to go to Pension Wise

Ian Osang, partner at Essex-based Ingard Independent Financial Management, contacted Legal & General late last year to get a quote for a longstanding pension client of his.

However, when the pension account value information was sent to the client, the information was accompanied by a letter directing that client to go to Pension Wise for retirement help.

In the letter, seen by FTAdviser, the client was told: "This is an important decision and you must consider all your options carefully. To help you understand your retirement options, the government has set up a free and impartial pension guidance service called Pension Wise."

The letter included information about the service, and added - highlighted in bold lettering - "We strongly recommend you take this guidance before you make your decision."

At the very end of the letter, Legal & General summed up four points for what the client should do next.

The first was to read a Money Advice Service guide, the second was to seek guidance from Pension Wise, the first was to shop around, and the fourth read: "If you're still unsure what to do, you should speak to a financial adviser."

Guidance is a very poor substitute for proper advice, so to find you are actively encouraging guidance over advice is a clear breach of Treating Customers Fairly.Ian Osang

Mr Osang said: "For me, the message is L&G is a company who have hitherto relied on business from IFAs to grow and effectively exist.

"In recent years it has closed the lines of communication to advisers, so we can no longer effectively manage policies for clients held with L&G and, to add insult to injury, it is now clearly advocating our clients cut us out of the advice process."

Mr Osang complained to the life and pensions provider in January, explaining the merits of independent financial advice for his clients, but was unhappy with the response he received.

The response from L&G stated: "We have to accept not all customers will have a financial adviser. While I accept you've made some valid points about the merits of obtaining financial advice, I feel it is not detrimental to encourage customers to get guidance and shop around.

"In fact, FCA regulations state we must do this."

The provider then pointed to COBS 19.4, where the FCA outlines what providers should tell clients. 

However, Mr Osang said this was not good enough - especially as other providers have been able to promote financial advice more prominently.

He followed this up with a communication to the chief executive, Nigel Wilson, complaining about not just the letter cutting advisers out of the loop but also the "inadequate" response he received to his complaint.

Mr Osang said: "This is very likely to cause significant issues in terms of L&G doing future business with the adviser community if they are not addressed.

"You are actively encouraging my client to seek guidance from Pension Wise or do their own research rather than take advice from his own IFA, who set up the contract and who has been providing him with regular advice for nearly a decade.

"Firstly, I would respectfully remind you the reason L&G have the opportunity to earn money from holding nearly £250,000 of my client's money is because I recommended he use L&G.

"To therefore find you are now actively encouraging to seek guidance elsewhere is completely unacceptable.

"Secondly, I would remind you Pension Wise is unable to provide advice, only guidance on someone’s options and which is best for them.

"Guidance is a very poor substitute for proper advice, so to find you are actively encouraging guidance over advice is a clear breach of Treating Customers Fairly in so far as you are encouraging consumers take one action, which is likely to be detrimental over another."

When asked about the literature, a spokesman for L&G said: "As a result of the pensions freedoms introduced in 2015 our pension literature for customers changed significantly.

"As well as discussing the various options available to customers the regulations require us to provide appropriate ‘signposting’ to customers which includes details of pension guidance and highlighting what other options may be available through shopping around with other providers.

"The need to take financial advice will vary depending on individual circumstances and customers need to decide what is appropriate for their needs."

Mr Osang's issue with Legal & General follows other complaints from insurance and pension intermediaries about the changes to the provider's communications, meaning it has become harder to get hold of L&G over the phone, and having to use an automated service instead.

simoney.kyriakou@ft.com