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Who’d be an IFA?

“Daddy, when I grow up, I want to be an independent financial adviser….”

Surely not the words that would strike dismay into the heart of any responsible parent (as the father of a 12 year old girl and a 14 year old boy going on 18, I can think of worse they could come home from school and say), however, with the recent pension reforms, and the increasing use of Independent Financial Advisers (IFA) as ‘fall guys’ by pension providers in the battle for savers to get hold of their own money, you could be forgiven for steering them towards a more noble profession in the public’s eyes, like estate agency, for example. Pensions_reforms

You see, the pension companies are terrified. Terrified that having given you a fair proportion of your own money back, you go and blow it all in one go and come back a few years later armed with a writ, wanting it all back again. When the biggest shake up of the pension market for over a hundred years was announced, there was much wringing of hands and gnashing of teeth and talk of pensioners forming queues outside Lamborghini dealerships. Now forgive me, but if you’re responsible enough to save the £300,000 or so it would take to purchase said car, would you be mad enough to blow your pot on a car that doesn’t have room for a picnic hamper and the grandchildren or leave you with enough money to fill it up with petrol? No, thought not.

So guess who’s latest public enemy number 1? According to the Mail On Sunday’s investigation (published on 17 June) some pension providers are using IFAs as a ‘bullet proof vest’ to prevent themselves being sued later. In other words, if and it’s a big if, you can find an IFA who will act on your behalf, and that advice is not to release the cash in your pot because, you want to buy a new property to let out, or want to add an extension, for example, even though you have carefully thought through all your options, if that same IFA thinks it’s a bad idea, then the same IFA will not help you release the money. Thanks.

Is that fair? I’m not a lawyer, but I do understand that if your pot has a value of over £30,000 or more and/or has a guaranteed annuity rate then getting advice is not only a sensible option but also a legal obligation upon the provider too. The difficulty highlighted by the Mail On Sunday in the same article, is having that same IFA help you get your own money out, even though you have weighed up the options and made an informed, educated decision. If they (the IFA, that is), doesn’t agree with your views, then they will in all likelihood, not want to act on your behalf even though there is a legal obligation on them to do so.

So what’s the moral of the story?  Simple really. Talk to an advisor who is driven by your needs, not the needs of anybody else. And over the longer term too. That’s why the Family Building Society works exclusively with Chase de Vere, for example, who provide a holistic view of later life planning including not only pensions but inheritance tax planning too. We trust them to give the best advice, just as much as we trust you to make a decision that’s right for you.

One final thought.
Of course the pension providers get paid a percentage of your money to look after investing it.
Once they’ve given it back to you, their income falls to zero…

By Alistair Nimmo

 

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Epsom
Surrey KT17 4NL
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