‘It’s cost me a day’s work’, said paraplanner Nathan Fryer after a trip to South Wales to help steelworkers who feel ‘embarrassed’ to have acted on advice to transfer out of their defined benefit (DB) scheme.
‘But it is not a big deal given the circumstances these guys are in,’ he added. ‘And as it’s Christmas, goodwill to all men.’
While most of the country was winding down for the festive season, some advisers were making their way down the M4 to Port Talbot. Their mission: to help steelworkers salvage their retirement from flawed or downright unsuitable pension transfer advice.
The undertaking, known as Operation Chive (counselling, help, information, volunteer, exchange) illustrates the divide that still exists between advisers, with IFAs going out of their way to repair the damage done by their peers.
It also illustrates the broader confusion the public faces when deciding which advisers they can trust and how to perform basic checks on firms.
The British Steel Pension Scheme (BSPS) saga dominated New Model Adviser® headlines toward the end of 2017. It looks set to rumble on this year, as the regulator continues to probe the transfer advice.
At the time of writing, seven firms have agreed with the Financial Conduct Authority (FCA) to cease all pension transfer business.
Meanwhile national restricted advice giant St James’s Place was the most high-profile name to take a commercial decision to steer clear of BSPS business.
By December, tales of poor and unsuitable transfer advice found their way into national TV and newspaper reports. The FCA faced a grilling from MPs in the morning press and again on Channel 4 News the same evening.
New Model Adviser® was first to reveal fears, expressed by trade unions, over pension transfer advice being given to BSPS members. Unions, and other IFAs, were worried about the way advice firms had been targeting industrial locations, including promoting the perks of transferring out of their DB scheme. The steelworks in South Wales was a prime target.
Earlier in the year it was decided the pension scheme would be offloaded, in a deal approved by The Pensions Regulator. This was to help Tata merge its European steel business with a German steelmaker, ThyssenKrupp.
BSPS members had to choose between joining a new Tata scheme paying lower benefits, BSPS2, or entering the Pension Protection Fund (PPF). Transferring out became an easy sell to some advisers.
But while the negative press has undoubtedly dealt a blow to the reputation of advice, IFAs are still striving to uphold the standards and decency steelworkers need, and would expect from the profession.
Step forward Operation Chive, spearheaded by adviser Al Rush (pictured below), director of Rutland-based Echelon Wealthcare. IFAs from around the country pitched in to offer pro bono help to steelworkers facing the toughest decision of their lives. The Personal Finance Society also gave official backing to the initiative.
IFAs offered counselling sessions in the run-up to the 22 December deadline for members to choose between BSPS2 and the PPF. Those with an existing transfer value now have until 26 January to complete a transfer out, should they so choose.
Two sessions organised by Rush were held in Port Talbot, home of the flagship British Steel site, on 11 and 12 December.
Three wise men
Nathan Fryer (pictured below), director of Surrey-based outsourced paraplanning firm Plan Works, was one of three advisers from the south-east of England to travel to Port Talbot. He was joined by financial planners Alistair Cunningham, director of Caterham-based Wingate Financial Planning, and David Penney, director of London-based Penney, Ruddy & Winter.
He said the group saw around 12 people, all but one of whom had already transferred out via Active Wealth, based in the West Midlands. Active Wealth was the first of the seven firms that have, to date, agreed with the FCA to surrender their pension permissions.
Fryer said: ‘We tried to reassure them that there are systems and processes in place to protect them against instances like this, such as the Financial Ombudsman Service if it comes to that. We couldn’t be seen to be giving advice, and [compliance consultant and ex-FCA technical specialist] Rory Percival gave us a useful set of notes to make sure we didn’t cross that line.
‘We established whether they had been given an unsuitable recommendation. If they felt it was unsuitable, we suggested the safest option was to move their money into cash for the time being while the regulator and the ombudsman sort out what happens next. But it was their decision.’
In letters submitted to the Work and Pensions Select Committee explaining their no-show at a BSPS evidence session in December, Active Wealth director Darren Reynolds and Clive Howells, director of unregulated introducer Celtic Wealth, alleged the advisers participating in Operation Chive had ulterior motives.
Cunningham (pictured below) said his only financial gain would be avoiding future Financial Services Compensation Scheme (FSCS) bills.
‘The only small ulterior motive I had was that I would rather pay a small amount as a profession today, say £1 billion across 22,000 advisers via the FSCS, than end up with between £10 billion and £100 billion in a few years’ time, once it has become a major scandal,’ he said.
Penney and Cunningham agreed that, in many advice cases, not enough consideration had been given to the benefits offered by either BSPS2 or the PPF. Too high an emphasis was placed on transfer values.
Penney (pictured below) said: ‘The key question, even if the advice is not obviously unsuitable, is whether the client’s objectives could have been met through other means while retaining their safeguarded benefits. I would start with an in-depth analysis of BSPS2 versus the PPF, before even considering a transfer as an option.’
The good guys
One success story emerged from Tim Harrop-Griffiths and Meurig Phillips of Cardiff-based AMG Wealth Solutions. They prevented a worker potentially incurring a charge of £25,000. It emerged the fund he had been transferred into by his adviser carried a 5% exit fee.
Harrop-Griffiths said: ‘We are not in the market for slating IFAs, but the biggest problem is the information being provided to workers. Some transfers may be the correct advice but, from the clients we saw, you could not determine that from the information provided.
‘We have seen a couple that have been superbly documented,’ he added. ‘But far too many have not collected or provided enough information to transfer.’
These six IFAs were joined by Kate Shaw, IFA at Cardiff-based Financial Life Planning, Andy Boyt, compliance director and financial planner at Cardiff-based Juno Moneta Capital Management, and Eugen Neagu, head of financial planning at Surrey-based Montfort International.
Over 40 advisers from around the UK put their names forward to help. Smaller Chive sessions were also held in Scunthorpe, Doncaster, Corby, Llanwern, Shotton and York.
Not too late
Pembrokeshire-based Harbour Wealth is planning to hold free help sessions for individuals who have transferred out.
Harbour independent financial planner Luke Stanley said: ‘We can’t take them back into the scheme. But if we can do a transfer value analysis report and try to identify funds where they may hit their performance targets, that is a start. If we are there and know where the transfers are going, we can do our best to help put it right.’