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Backstage with Keith Richards – 6 July 2020

Blog

Publication date:

06 July 2020

Last updated:

18 December 2023

Author(s):

Keith Richards

PII/FSCS

The ongoing challenges surrounding a hardening PII market has increased the number of member communications being received by us and personal calls and meetings I am having each week. I met with leaders of three trade associations last week to consider how best to drive forward a ‘united’ approach with policy makers and can confirm that I received a positive note back from HM Treasury to progress further discussions.

Amongst the various meetings last week I was fortunate to attend a roundtable with John Glen MP, Economic Secretary to the Treasury and whilst there are obvious burning challenges facing the country, the importance of financial planning to the country’s future wellbeing is acknowledged as something which needs to be addressed for the long-term.

PFS Asia

I also caught up with our team in Hong Kong who serve the needs of both the insurance and financial planning sectors across Asia Pacific. Hong Kong went into lock down six weeks ahead of the UK and are six weeks ahead in terms of a phased return with the launch of PFS Asia planned for early Autumn.

Abridged advice or unintended consequence

When pension freedoms were first announced in 2014, it took everyone by surprise. Despite a lack of consultation and significant potential for unintended consequences, especially the inclusion of Defined Benefit (DB) schemes, the government ploughed on regardless.

The British Steel saga brought concerns about DB pension transfers to a head and proved a turning point for professional indemnity insurers, with restrictive cover and increased premiums becoming common for most adviser’s involved in the defined benefit transfer advice market.

In August 2019, some 3,042 advisers held pension transfer permissions but less than one year on, as at 16 June 2020, the number has reduced to 1,965 and it is unlikely that many of these have got or will be able to secure adequate professional indemnity insurance at renewal.

The FCA rightly remains convinced that advice is vital if consumers are to understand what they are giving up by accessing pension freedoms, but their own action of more than doubling the Financial Ombudsman Service compensation limit to £350,000 and recent rule changes have further fuelled an already hardening PII market forcing more and more advisers out of the market.

Alert to the issue of reduced access to defined benefit transfer advice was perhaps a driver for the introduction of abridged advice.

Abridged advice, which will be effective from October 2020, allows an element of individual advice into the triage service for defined benefit pension transfer recommendations, without making it as costly or as an in-depth financial review.

It must be carried out or checked by a pension transfer specialist, involve a suitability report for advice not to transfer and cannot involve assistance to transfer or convert unless the client has taken full advice. Abridged advice is clearly an attempt to resolve the reducing availability of advice for consumers and address some of the concerns identified in the FCA’s supervisory findings, but it is difficult to see how or why there will be much take-up.

For advice firms, using the abridged service may save them time and allow them to offer a limited service to clients at a reasonable cost where appropriate but the ‘law of unintended consequences’ seems very clear and present.

The starting point and end point - is not to transfer and should there be a possible benefit identified, the client would have to be referred to another adviser who can conduct a non-predetermined recommendation. In many instances, the firm offering abridged advice may not have PII for full advice and would therefore have no option to refer to another firm.

Regulated advice is regulated advice and no consumer would be reasonably expected to recognise the difference in a name or process by an ombudsman, or indeed a regulator should at a later date it is determined that a transfer would have been appropriate.

PFS Awards 2020/21

Entries to our PFS Awards 2020/21 closed last week and I am absolutely delighted to see over 120 members and firms submit entries.

In what for many will prove the most challenging year of your working lives, 2020 still offers the prospect of being recognised for your professional expertise when we present our awards to the winners in November.

The volume and quality of entries is testament to the continued pride many of your display in your profession and the engagement we enjoy with you. Our judges have a tough job sifting through these over the coming weeks!

Sadly, the ongoing pandemic means that the annual glitzy gala dinner will not be possible this year. However, the hard work of entrants demands an alternative style event; not least one which showcases the cream of our profession and celebrates their success with the wider profession.

We are therefore excited to be inviting a special celebrity host to announce the finalists and winners as part of a special virtual event that will take place on Tuesday 3 November.

Your feedback is welcome via email to pfsnews@thepfs.org

Keith Richards
Chief Executive Officer – Personal Finance Society

This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.