Lessons from Pension-Switching

Our Administrator was sitting on a plane, flying into Bristol the other day.  Inadvertantly, he found himself eavesdropping on a conversation betweent two corpulent IFAs in the seat in front, returning from a business meeting.

Apart from the unedifying references to colleagues and office politics, the core topic of conversation was all about the volumes of commission which these guys expected to earn off their client.  The word 'churning' was not used, of course, but you'd have had to be freshly arrived from the Planet Zog to be unaware that their business model was based on switching clients from one arrangement to another.

For advisers like this, 'principles-based' regulation is a foreign language - or at least a new magic compliance wand which they can wave over unsuitable advice in order to make it 'compliant'.  If the FSA is talking about 'client outcomes', then I guess the only outcome which actually matters to this sector is the next transaction.

Which brings me to the FSA's "Pension Switching Advice Roadshow" which I attended yesterday.  Set aside for a moment the fact that the casestudy involved such a blatant example of opportunistic churning, that I doubt that any IFA (that I know) would feel comfortable with it.  Ignore for the moment the absence of practical guidance on those grey, ambiguous areas which we all encounter from time to time.  The message that came across loud and clear is that very few IFAs appear to have sufficiently robust processes to enable them to accurately and objectively identify improved outcomes for their clients.

We're all on a journey here, I accept.  'Principles-based' regulation arrived in November 2007.  Since then, we've re-written the guidance and have been steadily developing new resources to equip our Members with the right tools to deliver this type of advice.  Pages 51-55 of the latest version of our Best Practice Platform contains a number of sample checklists aimed at helping our Members to guarantee that they have delivered improved outcomes for their clients.

We think that this is the holy-grail for IFAs.  Members should keep their eyes peeled for a new resource allowing them to really leverage the benefits of an 'outcomes-oriented' business proposition.