Minimum standards required

The Treasury have announced their plans to provide a guidance service to those people with a defined contribution pension plan (typically personal pension plans, stakeholder pension plans or occupational money purchase plans).

The new service will be delivered by a combination of The Pensions Advisory Service (TPAS)  and the Money Advice Service (MAS) the latter organisation already funded by a levy on financial services firms but often erroneously described as if it were a Government funded body.

A new levy on financial services firms many of whom will be independent financial advisers is being consulted upon by the Financial Conduct Authority.

Whilst no firm numbers are yet known we have estimated that given there is an expectation of up to 300,000 people potentially using the service and assuming a cost per person of £50, IFAs, expected to be responsible for circa 30% of the levy costs, might expect to pay £1,250 per firm per year.

More indeed as the FCA consultation suggests IFA firms with low turnovers (under £100,000 a year) are excluded from the levy.

Chancellor George Osborne seems to have reneged on his Budget comment that the Treasury would fund this with £20m and instead decided to target a soft option the financial services intermediaries who may not trade unless they pay these regulatory fees.

There is no opt-out option in all this.

So assuming that we have to stump up £1,250 each year (with the ability at MAS has to freely spend other people’s money it is highly likely to be a bigger sum) I think we should have a voice in this.

The guidance service must attain exactly the same standards as the regulated market.

* It must be staffed with qualified people with financial services qualifications at QCF level 4 minimum;

* Supervisory staff and managers must be qualified to QCF level 6 standards (Chartered Financial Planner for example);

* There must be a clear statement (like the warning on a cigarette packet) that this is guidance not advice and that there is no come-back on the service provider if the user takes an action that does not turn out to be in their best financial interests;

* This statement needs to be front page of their website and in capital letters on all their literature;

* Prior to the delivery of any guidance the service provider must carry out a full “know your customer” exercise (fact find) with the service user;

* A mystery shopping panel of competent advisers must be created to road test the service ahead of its roll out to the consumer;

If service users are sign posted towards taking advice then that advice must be from independent financial advisers and a register of advice providers should be outside of the control of MAS (Unbiased.co.uk, for example.)