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Paraplanners & Pension Planning

by Para planner on 15·12·2015

With the advent of Auto Enrolment, everyone over the age of 22 earning over the minimum threshold will soon have a pension. This could mean someone retiring now at age 65, having started work at age 18 in 1968, could have pension benefits under various stages of pensions legislation including final salary, AVC's, Section 32 buy out plans, Retirement Annuity Contracts, personal pensions, SIPPs, Stakeholder and Group Personal Pensions - not to mention various types of funds and contracts with old/new, dirty/clean share classes and adviser charging!

Can you remember the rules, regulations and quirks of all these plans?  I used to work with a colleague whose nickname was 'The Oracle', but unless you write Cii exams in your spare time, or have a photographic memory, the likelihood is you will need to call on others for a helping hand.

Whilst the new Pensions Freedoms are still bedding in, with both advisers and providers, clients are keen to take advantage of what they perceive to be the opportunity to get their hands on their hard earned money, wresting it away from the clutches of the 'evil' pensions companies, unaware that their existing plans will not facilitate UFPLS or FAD (or in fact what these even mean).  All this before we even start to look at the forthcoming changes to the State Pension.

Having spent an agonising amount of time biting my fist whilst listening to various consumer programmes on Radio 4, BBC and the like, it is clear that more and more clients will need to have a helping hand to access their funds and find a pensions solution which is the right fit, let alone make a plan for the money to last the rest of their lives, or even to pass funds on to the next generation.  Whilst there has been much talk about the number of clients needing advice who may only have small value pension pots, this may be taking things at face value; once a full analysis of a client's pension history has been obtained they might be worth far more than you or they had initially thought.

Of course the way we charge clients for this type of service may need to change, with hourly rates or fixed price services being offered, simply for untangling the whole situation, before a recommendation for the next step is even proposed.  With clients now experiencing first-hand the time and aggravation it takes to tease information out of pension providers, with hours spent on the phone, and weeks of correspondence back and forth, they will hopefully start to see the value an adviser and their support teams can offer.

And it will take a team to carry out this service for clients.  Even if you are from the George Kinder school of thought, the 'plan' still needs to be put together using hard facts and taking account of the restrictions and timescales of existing pension arrangements. 

Obtaining the right information to build a client's pension plan is never a straight line process, from client, to adviser, to paraplanner, spitting out a neatly bound report at the end of it all.  It takes ongoing communication to ensure that the process runs smoothly from the outset.  Whether you use an in-house or outsourced paraplanner, minutes spent discussing the case with your support team can save hours being wasted as the case progresses.  How many times have you sat down to review a file, in order to make your recommendation, only to find information missing or that someone has gone down the wrong route because they got the wrong end of the stick?
Looking at how many times you might 'touch' a case between start and finish, how much input could you have from your paraplanner and support team to help you along the way?

Step 1 - Preparing the client meeting pack i.e. generating the Fact Find document, Letters of Authority, BR19, Defined Benefit TVAS data capture form, annuity health questionnaire, pensions tracing service application.

Even before you've met with your client, your team can ensure something as simple as getting all the right paperwork to the client so it is all present and correct, ready to be submitted to ceding schemes as soon as your meeting is over, can save days of extra time.  Discussing the client's initial call to you and the objective of the proposed meeting helps your paraplanner and support team get the ball rolling straight away.

Step 2 - Client Meeting i.e. discussing client needs and objectives.

As we all know, fact finds never tell the whole story, so it is imperative that after a client meeting you add some meeting notes.  This can be done the old school way by writing them out, or perhaps if you and your clients were happy, you made an audio recording of the meeting?  Either way, it really helps to discuss the outcome of the meeting with your paraplanner.  This allows you to explain in more detail the 'soft facts' of the clients situation and objectives, but also allows your paraplanner to quiz you about missing information, alternatives and potential solutions - they are masters of the Inquisition!
Step 3 - Data Gathering i.e. submitting requests to existing pension providers for policy information.

At this stage you should be able to step away from the case and think about something else for a few weeks, even a month.  Providers have been overwhelmed by enquiries since the Pensions Freedoms came into force in April 2015, and timescales have increased significantly.  Once you do finally receive a reply to your request for information from the provider, if you have forgotten something (or just as likely they didn't include everything you asked for) the clock starts ticking again if you need to go back to them.  This is where it is important to have had the discussion with your team at step 2, so they are clear on what they are asking for and why, so the chances of missing information is reduced.  It really helps to have an educated and experienced support team on your side so they can understand the data being gathered and get everything required for the job in hand.
Step 4 - Data Analysis i.e. Reviewing data gathered from client and pension providers.

When you finally have in hand all the documentation and information requested you can start to build up a picture of where the client is at the current time, unravelling all of those various pension schemes and policies.  With the advent of call centres and the reduction of qualified staff at some provider offices, we often find that with older style schemes where there may be protected tax free cash, GAR's, or transfer penalties, that we don't get an answer or worse still get an incorrect answer to some of our original queries.  It takes an experienced paraplanner to spot the 'obvious mistake' on these types of plans, before you get to recommendation stage.  You will be grateful for their beady eye. 

Once you (or your paraplanner) are sure all the information is in hand, now is the time to sit down again and discuss the overall picture.  You may decide between you that further analysis is required and your paraplanner can work with you to provide cash flow modelling, asset allocation analysis, product research and anything else you need to get to a final recommendation.  Whilst you may have a firm idea about how you wish to proceed, it is always useful to have someone else to bounce ideas off, and play devil's advocate if required.  Your paraplanner may be younger than you, but how many different advisers do they work with?  How many cases do they deal with on a weekly basis?  They are likely to be far more experienced than you give them credit for, and as a consequence you should look to take advantage of this and seek their views when putting together your client recommendations.

Step 5 - Preparing Recommendation i.e. Obtaining quotes and new business packs, preparing client report.
Once you have come up with a final recommendation, knitting together all the clients needs, you will of course need to put together a report with all the necessary supporting documentation.  This should be the easy bit!  However, despite what Rory Percival may say about suitability reports, with the amount of changing legislation, your compliance team will want to ensure that new things are always being noted in the report.  It is hard work keeping up with all this and if you are trying to do this on your own you are bound to make some mistakes along the way.  I can't think of any adviser who would willingly put together a report themselves, rather than hand it over to a paraplanner, and free up time to be meeting clients instead.  This is not to say that you should not review the report once it has been drafted and check it is what you had in mind.  It may take several attempts to get to the final version, but if you have kept communicating along the way, then any changes should be minimal. 

Step 6 - Final Presentation i.e. Discussing final recommendations with client, signing up the case and implementation.

Now is the time to take back the case, and visit your client again - or perhaps simply issue the report to them by post/online and follow up with a call.  And if they have any queries?  Hopefully you will have introduced your paraplanner to your clients at the initial meeting, or at the very least explained who they are, so if you are not around the client will have the confidence to speak to them in your absence.  Let's face it, by now your paraplanner knows the case at least as well as you do.

Once your clients are happy to proceed and have signed the acres of paperwork required, your team will be in a position to submit the applications to the providers.  Whilst this seems like the end of the process to the clients, we know that pension transfers/payments can take many weeks, even months to complete.  During this time you will want to know that your support team are keeping their finger on the pulse and chasing things up for you.  This is a time when it is good to know that your paraplanner is on hand to call the client, keeping them up to date on how things are progressing.  Once things are all complete and you are in a position to send the final policy documents to the client, you can sit back and relax in the knowledge that the client has a solution to their pension needs - and make your paraplanner a cup of tea to say thanks for all their input!