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    From Ros Altmann:economist and pensions,
    investment and retirement policy expert

  • pensionsandsavings.com

    Another look at the Pick-A Directory – developing it to be fairer to IFAs

    Another look at the Pick-A Directory – developing it to be fairer to IFAs

    13 January 2014

    Pick-A Annuity Directory another look

    Suggestions to build on all the initial work

    It is essential to explain properly the value of independent whole of market advice

    My comments on the Pick-A Directory have really upset those who put it together.  It is such a shame that the wording was not tested on consumer groups or shown to independent advisers before the site went live.  Now that the service is launched I have had a chance to look at it in more detail, rather than only seeing the wording on the test site.  Here are my further comments.

    Site looks good:  The Pick-A site is easy to use, it looks really good and clearly a great deal of work has gone into it.  The operational aspects of the Directory and its functionality work well and are user-friendly.

    Content needs adjusting to remove bias against advice:  The content, however, needs adjustment to ensure it is fairer.  I am pleased that some of the wording that was so biased in favour of non-advice and against advice is being changed and hope there will be further developments.  The Directory should help provide better outcomes for people reaching retirement, especially if they have small funds, rather than just staying with their current pension provider.

    Need clear explanation of difference between whole of market advice and non-advice:  The description of ‘advice’ and ‘guidance’ needs to be developed to explain clearly the difference between fully whole of market independent advice, tied advice from a limited panel (albeit covering 75% of annuity companies) or non-advised brokerage and guidance.  I have put together some alternative wording which I hope will be helpful for a future version.

    Separate section for whole of market IFAs:  It would be really useful if the Directory had a separate section for independent, whole of market individual advisers, to distinguish them from tied advisers and other sales channels.  Although there are fewer whole of market IFAs than tied or non-advice services, these IFAs offer the best chance of delivering optimal outcomes for customers, especially for enhanced or impaired life annuity purchases and for those who do not have very small funds.

    Bias towards non-advice should to be removed:  Implying that non-advised ‘guidance’ is at least as good for the customer as ‘advice’ – or even better – has raised significant concerns and is misleading I am pleased that some movement towards removing the biased wording has already started.  Taking independent advice will almost always be better than trying to make this complex decision on one’s own.  I have also seen many examples where full advice actually costs less than the 3.5% or higher commission taken by a non-advice service.

    Show fairer examples of fees and commissions for larger and enhanced annuities:  For small funds, using an adviser will often be more expensive than non-advice services, but those with average size funds and who qualify for enhanced rates could find full advice is actually cheaper.  Unfortunately, the examples of fees and commissions used in the Pick-A Directory relate only to small funds and standard, rather than enhanced annuities and are therefore potentially misleading.  The needs of those with smaller funds should not drive this Directory, it should cater for all size funds and include examples of fees and commissions for both standard and enhanced rate products.

    The alternative Pick-A wording – that highlights value of advice:  I have drafted alternative wording that might have been put together by those who want to ensure people understand why using an IFA has significant value!  This wording could better describe the relative merits of advice and non-advice to help people with their retirement options and annuity purchase.  By not differentiating those who only cover 75% of the market from those who cover all providers, the Directory implies both are equally valuable.  This is not the case, albeit for smaller funds there will be a cost issue.  Including a separate section for individual whole of market advisers would help clarify those who cover all providers and take responsibility on the customer’s behalf for finding the right product.  The following draft is designed to promote discussion, but I hope it will be helpful in developing this long-awaited annuity Directory further.


    One thought on “Another look at the Pick-A Directory – developing it to be fairer to IFAs

    1. A very objective assessment Ros, thank you.

      Clients clearly need to see as well as understand the difference between independent advice and restricted advice, and even more so that restricted advice usually costs more in fees.

      Brian

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