The chief executive of the Money Advice Service (MAS), Caroline Rookes, kicked off a nasty row last week when she told a conference she was “personally worried about the ethics of regulated advisers”. The UK’s financial advisers didn’t take it sitting down.
Within a few hours, pretty much everybody representing them had demanded some sort of apology for what one adviser called her “offensive and bizarre comments”.
I have some sympathy with the advisers. Most are honest and concerned about their clients, while finding it tough to figure out how to match their pre-RDR (Retail Distribution Review) incomes in a commission-free world.
But on the other hand, look at the behaviour of a subsection of advisers and then at the financial services industry as a whole, and you will note that anyone who isn’t concerned about ethics in the industry isn’t concentrating very hard.
Last week’s news chucks a little more fuel on the fire. Look at pensions. Perhaps you took out a pension a while ago and forgot about it – or a now-deceased relative did.
You might think that when the would-be recipient hit retirement age, the pension provider might have a little look for him. You’d think wrong. They have no obligation to do so. So they don’t.
Instead, says Richard Evans in The Sunday Telegraph, they “automatically” turn the pension pots into poor-value annuities (meaning the could-be recipient not only gets a rubbish rate, but also missed out on the chance to get 25% as a tax-free lump sum).
They then pay the proceeds into a holding account, from where it will be distributed should the customer get in touch. If he doesn’t? Easy, says pensions campaigner Ros Altman: “the money will eventually be pocketed by the company.” Nice.
On to mortgages. Perhaps when you took out yours, you thought it would be useful to keep it when you moved. So you got a “portable” deal that would allow just that. The problem? It might not.
Thanks to the new affordability rules introduced after the Mortgage Market Review, mortgage lenders now require movers to reapply for their deal as if they were new borrowers, says The Times.
Many now don’t qualify, even if their circumstances or earnings are unchanged. And yet the new lending rules contain provisions that allow lenders to choose not to apply them to existing borrowers who do not want to borrow more or extend their term.
If Rookes is only worried about the ethics of a few advisers she needs to get out more: they’re just the tip of a very trying iceberg.