Some unbundling is more equal than others

Mark Polson’s article on re-registration grabbed my attention. He has an uncanny knack of cutting through the fluff and getting to the detail. But the Polson express flashed past an important stop on the way to destination platform utopia – pension transfers.

Mark rightly points out that, although varying significantly platform to platform, much of the funds that sit on platforms reside in pension wrappers. Some still even call themselves SIPPs but whatever the name they’re still a pension, and switching a pension from one provider to another still requires advice. And advice requires the client to pay.

So there’s an inconvenient stop on the journey to seamless registration, one that all the swift transfer of funds and assets cannot get around: the ‘inconvenience’ of making a recommendation to a client and gaining their agreement.

Advisers who buy into a platform ecosystem probably never think they’ll need to move a client to another platform. Feedback also suggests they rarely do so in order to access pension expertise, seeing the bundled wrapper as sufficient. However, the cost of then having to move that wrapper in the future may well end up costing the client more – both that cost and that cost to the adviser’s time are incalculable.

The past of financial services is littered with bundled products that failed to varying degrees to meet client needs. Bundled insurance with mortgages, payment protection insurance with loans, the list is endless. I’m not saying the bundling a platform and pension together will end the same – let’s hope not. But in the brave new world of unbundling and clean pricing investments it seems rather ironic that the consequences of bundling a pension wrapper or SIPP have been overlooked.

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6 thoughts on “Some unbundling is more equal than others

  • We apologise for the delay on the Polson express and for the obvious inconvenience caused.

    This is really interesting. If you buy the argument that platforms are serving (in the main) a client base who is perfectly well suited to mainstream collectives and (at the extreme) mainstream ETFs, then aren’t the on-platform vanilla wrappers perfectly good enough? A world of difference between bundling of PPI with loans and using a ‘clear plastic bag’ simple wrapper.

    Also, do pension transfers (where simple) always require advice? Having done my own (2, from ShP / DC OPS into a platform SIPP) without advice, I’m pretty sure it’s possible.

    But by the time you’re really getting into SIPP-land with lots of commercial property, physical gold, poncey Uzbekistani yak futures or whatever, then I concur on the product stuff.

    And I completely agree that assets have clients attached to them and they have to give consent – which is why there won’t be a wall of money coming off the ceding platforms but it will happen over time. I’ve seen too many advisers move books systematically with client consent to think that that will be a major issue where there is genuinely a good reason to move.

    Reply
  • I’d love to get the adviser view on this.

    I’m certainly not saying the vanilla wrappers aren’t good enough whilst they’re on the platform. It is just an additional complication (and one that happens to need advice) when moving from platform to platform with a re-reg process.

    Does a pension to pension transfer always need advice? I think so, notwithstanding that customers can move the pensions themselves (providing the platform accepts e/o and providing the regulator overlooks it should advice then subsequently continue afterwards).

    We don’t need to be talking about complex investments to still see that there’s still a pension to pension transfer.

    Question: is advice given to re-reg and change platforms, bearing in mind the client is paying for those services? This might be a forward-thinking question – as you say, movement en masse hasn’t started yet.

    Reply
  • Leaving out that money purchase pension switches (non OPS) and pension transfers (OPS) can be done without advice (I’m not sure if it is a regulatory requirement for DB scheme transfers to be advised but you try finding a provider who’d accept one without someone else clearly having liability!), what client not having advice is going to re-reg a pension? Or an ISA for that matter?

    Surely the only point that re-reg becomes a benefit is in cases where CGT is a problem? OK there’s time out of the market but what is it? A couple of days, a week maybe?

    And can this only be a benefit for pension plans (if it is a benefit at all) for platform to platform switches anyway, you can’t re-reg an insurance company mirror to the clean share price, can you?

    I think that Phil’s comment about the nuclear deterrent on your post was the one Mark. An advised platform switch where re reg is available will surely need nothing more than a simple explanation of why the new administrator is better, as nothing else changes. All of the original advice about tax wrappers, premium levels, investment choices etc hasn’t changed. So maybe overall it will be a good thing for consumers in the platform space.

    Reply
  • I’d love to get the adviser view on this.

    I’m certainly not saying the vanilla wrappers aren’t good enough whilst they’re on the platform. It is just an additional complication (and one that happens to need advice) when moving from platform to platform with a re-reg process.

    Does a pension to pension transfer always need advice? I think so, notwithstanding that customers can move the pensions themselves (providing the platform accepts e/o and providing the regulator overlooks it should advice then subsequently continue afterwards).

    We don’t need to be talking about complex investments to still see that there’s still a pension to pension transfer.

    Question: is advice given to re-reg and change platforms, bearing in mind the client is paying for those services? This might be a forward-thinking question – as you say, movement en masse hasn’t started yet.

    Reply
  • We apologise for the delay on the Polson express and for the obvious inconvenience caused.

    This is really interesting. If you buy the argument that platforms are serving (in the main) a client base who is perfectly well suited to mainstream collectives and (at the extreme) mainstream ETFs, then aren’t the on-platform vanilla wrappers perfectly good enough? A world of difference between bundling of PPI with loans and using a ‘clear plastic bag’ simple wrapper.

    Also, do pension transfers (where simple) always require advice? Having done my own (2, from ShP / DC OPS into a platform SIPP) without advice, I’m pretty sure it’s possible.

    But by the time you’re really getting into SIPP-land with lots of commercial property, physical gold, poncey Uzbekistani yak futures or whatever, then I concur on the product stuff.

    And I completely agree that assets have clients attached to them and they have to give consent – which is why there won’t be a wall of money coming off the ceding platforms but it will happen over time. I’ve seen too many advisers move books systematically with client consent to think that that will be a major issue where there is genuinely a good reason to move.

    Reply
  • Leaving out that money purchase pension switches (non OPS) and pension transfers (OPS) can be done without advice (I’m not sure if it is a regulatory requirement for DB scheme transfers to be advised but you try finding a provider who’d accept one without someone else clearly having liability!), what client not having advice is going to re-reg a pension? Or an ISA for that matter?

    Surely the only point that re-reg becomes a benefit is in cases where CGT is a problem? OK there’s time out of the market but what is it? A couple of days, a week maybe?

    And can this only be a benefit for pension plans (if it is a benefit at all) for platform to platform switches anyway, you can’t re-reg an insurance company mirror to the clean share price, can you?

    I think that Phil’s comment about the nuclear deterrent on your post was the one Mark. An advised platform switch where re reg is available will surely need nothing more than a simple explanation of why the new administrator is better, as nothing else changes. All of the original advice about tax wrappers, premium levels, investment choices etc hasn’t changed. So maybe overall it will be a good thing for consumers in the platform space.

    Reply

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