Balancing client wants with FCA rules and FOS decisions
Joe Macguire, pensions specialist and founder of Beckford James, says when faced with pension freedoms conflicts advisers feel ‘damned if you do and damned if you don’t’
There is no doubt that the pension freedoms have brought greater flexibility and choice for investors, but pensions specialist Joe Maguire, a founder of Beckford James, says advisers sometimes have to balance what the client wants, which may mean relying on the regulator’s insistent client process, with differing potential decisions from the Financial Ombudsman.
The introduction of the pension freedoms in 2015 brought with it radical changes, in a move that was hailed as providing greater freedom for investors. However, with it seems to have come a growing responsibility for advisers act as ‘custodians’ for clients’ assets to stop them running out in the future.
When faced with clients who want to have access to their pension pots but that may leave them short in the future, advisers have to strike a balance between following the regulator’s insistent client process with conflicting feedback from the Ombudsman that advisers should not facilitate a transaction they do not support, says chartered financial planner Joe Maguire.
Founder of Bath-based chartered financial planning firm Beckford James, Joe says the differing stances between the regulator and Ombudsman has created an “unrealistic disconnect” between the two, with advisers seemingly stuck in the middle.
He says: “ There is a growing belief within our industry that we have become the guardians of our clients’ future and have been tasked with telling people what they can and can’t do with their money. We can illustrate to them the implications of their proposed decision, but it’s not our job to dictate how people spend their own money.
“If you walked into a bank and asked to withdraw a notable sum of your own money, you would not expect the cashier to question why or make that decision for you, but increasingly the Ombudsman believes financial advisers should not carry out client requests they do not agree with,” he adds.
Since starting his career in financial services in 1987, Joe has witnessed a dramatic change in the industry, most notably the Retail Distribution Review. Whilst being supportive of protecting clients from scams and unregulated investments, he says there is the danger that financial protection has gone too far and if a client has capacity, the law should treat them as responsible adults who can make their own decisions.
“Financial advice has undergone a lot of professional changes to improve outcomes for clients with transparency and fairness, which has been a fantastic and necessary development, but somehow we have removed any form of caveat emptor from the equation,” he explains. “For example, a solicitor may not agree with the outcome of a client’s will, such as disinheriting the family, but it is not their place to question it, it is the client’s decision.
“My job is to work closely with my client in helping them achieve their future goals and explain the implications of their decisions in detail, but ultimately they must have the freedom to make their own choices about how they spend or invest their money.”
And while the pension freedoms have led to the greater need for investors to seek advice in order to understand what the changes mean for them, advisers must tread a fine line.
Joe, whose primary specialisms are pensions and trust work, says: “Advisers run the risk of losing clients or receiving complaints for not agreeing to carry out certain transactions, but there is also the worry of receiving a complaint further down the line if the client regrets their decision. I think in some circumstances, it’s fair to say you’re damned if you do and damned if you don’t.”
Joe says those clients who are absolutely determined to do something, even against the expert advice of their financial adviser, will always find a way to do it even if that means switching adviser.
“For me, the big issue is that financial advice and financial planning were created to facilitate the client in making those important decisions, and I don’t think we should allow ‘policing’ to creep into what we do.”
It is his commitment to championing the interests and rights of clients that has helped Joe forge a successful career in financial services spanning nearly three decades. Having spent 16 years at Chase de Vere, followed by a six-year stint in consultancy roles, Joe made the decision in 2009 to set up Beckford James with two former colleagues. Over the past seven years, the firm has built up a steady and loyal client base and been awarded Chartered status.
The firm advises both private and corporate clients, with the ratio at 80/20 respectively, with the main focus upon retirement. Auto-enrolment advice features in the services offered.
“I think auto-enrolment has been a long time coming and we are there to assist those companies who require help for their employees. A lot of people are disengaged from pensions, or take the approach that retirement is too far down the line to worry about now, but there needs to be more awareness around the need for planning,” says Joe.
“We’re still at the very thin end of the wedge and there’s a lot of work to do, but it’s great that we’re making steps in the right direction and helping people to engage with their future and highlight the importance of financial planning,” he adds.
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