IFAs and the latest buzzword

It seems that, wherever one looks, our profession is in the grip of one key, driving concept, summed up by one semi-plausible word:  consolidation.  Last week, I was visiting a new firm of accountants planning to join our network, and they showed me an example of the advice being given to one of their clients by one of the largest, longest-established, and most professional IFA firms in the area.

The suitability letter milked that word (consolidation) for all it was worth.  You would have thought that the mere act of transferring a basket of assets from one pension to another must have some kind of profound magical effect.  Given the nature of the two companies involved, this seemed a dubious contention, but the IFA was clearly encouraging the client to suspend all critical faculties in order to...consolidate.  Look into my eyes...consolidate...consolidate...

Nowhere in the suitability report, did the IFA even bother to analyse the deficiencies of the old arrangement, although a few bland aphorisms were trotted out..."underperformance"..."higher charges"...without any supporting data.  There was no spreadsheet of attaching analysis - and the case would have failed on virtually every one of the FSA's criteria for replacement pension contracts.

For me, this summed up the depressing state of our industry.  Intermediaries get away with doing lazy, unproductive product-churning, but provided the client is not disadvantaged nobody appears to care all that much.  Perish the thought that we would actually be able to demonstrate some advantage to the client from the process.

In fact, the cynicism of the adviser was palpable in that suitability letter.  The client was being switched from one, old-model, traditional insurer to another old-model, traditional insurer, with the justification being a Synaptics analysis based upon product terms.  There was not even the pretence of a transition to a new-model platform for handling the investment.

Coincidentally, I have spent the last few weeks reviewing a range of 'old-style' pension arrangements with companies such as Scottish Widows, Norwich Union, NPI, Axa and Friends Provident.  To say that the medium to long-term results from these contracts are underwhelming would be to cast an overly favourable gloss over the tawdry and valueless benefits which (generally) had accrued to the clients concerned.  When a nineteen-year policy is barely returning the contributions paid, you know something is profoundly wrong.

So, perversely, I do think that there is an argument in favour of consolidation - I just happen to think it has to be a much stronger one than those examples that I routinely come across.  If this bothers you, and you really do want to get it right, then you can download my checklist by clicking here.