Friends I haven’t seen in a while still ask how my Pensions career is going. It always seems an odd question to me, because I think my career has been in change and regulation not Pensions. But given that I worked on the Pensions Review (93 to 2001), FSAVC Review (99 to 03), ETV Pensions Transfer Review (18-Now) and now we expect to see a review of DB Transfers perhaps it is not such an odd question. (Although the last two are company reviews rather than formal industry wide reviews, in practice there is not much difference.)
I have even done a couple of expert witness assignments trying to offer an opinion on the causes and conduct of the Pensions Review.
Against this background I am going to try and suggest some of the reasons why Pensions and particularly Pensions Transfers keep being reviewed.
It is a complicated landscape to advise on. Even the actuaries, AF3/AF7’s and Pensions Trustees spend their days trying to understand arcane parts of the Pensions landscape. Which means that advising clients where to put their money for the next 30 years, with what risk profile, in what funds is a really difficult thing for anyone to do.
Clients understanding of the advice they receive and the declarations they are asked to make is typically very low. If only we could ask them to take the AF3 – Pensions Planning exam before receiving advice. But ten or fifteen years later when risks have started to crystallise into issues and when retirement is no longer a remote possibility, clients’ can more easily see what the best course would have been.
Rules and Standards evolve on a frequent basis. As problems emerge the regulator looks into the problem, often over many years, determines a regulatory response and eventually following consultation the rules are changed. For example, COBS 9.5A guidance for firms with insistent clients provides handbook guidance on insistent clients some thirty or so years after firms first started relying on insistent customer letters.
Inevitably retrospection plays a part, as new rules and standards are issued, we look back at previous advice, and sometimes the advice of yesteryear does not stand up to the scrutiny of today’s standards. It seems unfair that business written five, ten or fifteen years ago is judged by today’s standards, but it is also hard to see an alternative.
Documentation and the ability to retain and find the factfinds, suitability letters, phone notes, bank statements, application forms and a host of other customer records appears to be the hardest part of Financial Service life. In every Past Business Review establishing the facts on an individual client’s case is sometimes impossible. Even in the cases where documentation is perfect the interpretation and re-analysis of documentation throws up questions and the need for re-review.
The best ways of reducing the risk of PBRs are to aim to minimise (I don’t believe they can be eliminated) the risk set out above:
• Amazing documentation and the ability to find it
• Horizon scanning to anticipate the direction of regulatory change; and
• Making sure you have a culture that focuses on the best outcomes for customers