Stop me and buy one

In the last few weeks, the financial press has been awash with headlines shouting out warnings. “FCA issues suitability warnings over DB transfers and considers thematic review”, “FOS SIPP claims rise another 12%” and “FCA wants to see suitability at every turn” are just three such headlines that have caught my eye.

Could it be the case that what ties these events together are advisers focusing on the moment rather than the outcome? Could it be the case that, as an industry, we are still too transactional? While we talk about financial planning and evolving our business model to be financial engineers, how many of us – hand on heart – really accept we have transitioned our business, post-RDR, to be defined as such?

I truly believe large numbers of financial advisers do an incredibly important job and often in difficult circumstances. Pension freedom is the curve ball that has been caught by the general public and fired up imaginations over what goodies to spend pension pots on.

While we are yet to see the first Lamborghini driven off the forecourt as a result of this change, the fact is people are using their money on items more designed to titillate than they were before – when using the fund as a regular stipend to put towards the month’s groceries was the order of the day.

As we all know and understand, the challenge for an adviser is to navigate a client through choppy waters. To deliver good outcomes for the client and minimise risk and exposure to future claims against the adviser.  In other words, to ensure the advice stacks up when it comes to a retrospective kicking at some stage in the future.

I am concerned, however, that the approach to advising clients in the world of pension freedom does not seem to be to be fit-for-purpose. In fact, rather than a robust process designed to satisfy the desires of clients to get their hands on their pension pots and where we can all sleep easy in our beds at night, it appears more suited to the stresses of the pension mis-selling scandal of the 1990s.

My G60 knowledge may be a bit rusty after all these years, but the FCA seems spot on when it says that recommending a transfer based solely on whether or not the critical yield is below a certain rate set by the firm for assessing transfers generally, “without taking into account the personal circumstances of the client” and the “likely expected returns of the assets” does not meet its expectations.

The FCA’s concerns highlight not taking into account the personal circumstances of the client. In other words, it is too transactional. As an industry, should we not have the conviction to say to newcomers that we only consider providing advice over their pension pot in the context of a proper financial planning approach?

The prospect may have found us on unbiased.com and wants to ‘transact’ but your business exists to deepen and better understand the needs of the client over the medium to long term. After all, deepening a relationship leaves a customer better placed and able to understand what is happening along the journey and less likely to react in a negative way if they perceive the transaction has not gone as planned.