A client of ours recently had one of our reports reviewed by their outsourced compliance service. The question of why they were moving the pensions, given that the current schemes were good value and had sufficient fund options to be able to re-align with the clients risk profile, was raised.
This got me thinking,
The client has approached the adviser to obtain advice, for that adviser to efficiently manage that client’s pension portfolio (should they accept the proposition) it makes sense that they are all in one place, providing there is no loss of valuable benefits.
To retain, 3 separate schemes with 3 different investments makes no sense to me, although I would argue that the client would probably not be overly fussed.
The benefit of consolidation in this instance is to the adviser….or is it?
For the adviser to effectively monitor 3 different portfolios, 3 different schemes, monitoring the lifetime allowance, annual contributions limits, financial strength etc. etc. would be an administrative nightmare. This would make the adviser business unscalable and the service proposition very expensive.
We all know, time is money and to retain and monitor three schemes as opposed to one would cost more in time and therefore money, which ultimately would be charged to the end client.
So in an example where the client has opted to receive an ongoing service, I would suggest that consolidation is in the interest of the client.
The compliance team in question ignore the fact that none of the existing schemes could facilitate any sort of annuity or drawdown strategy meaning that upon reaching retirement they will have to transfer / purchase an alternative product in any case.
I would be interested to hear your thoughts!