4 things still going wrong in financial services 30 years later

by Melissa Hall on 01·02·2022

9th December 2021 saw me complete 30 years in the financial services industry.  A career that has spanned 3 decades and only with 3 employers.  Maybe I am loyal, maybe I am stuck in my ways!!  The only other job I have had is working as an “egg collector” at weekends as a teenager whilst at school.  Not really comparable!

December 1991, John Major was the Prime Minster, the Bank of England Base Rate was 10.375% and 7.1% of the population was unemployed.  In the City, the Square Mile boasted that it has the highest concentration of financial employment across the world!

There was also a programme to get 16 and 17 years old into employment; The Youth Training Scheme and the pay was the grand old amount of £29.50 per week but it was my pathway into financial services.

Back then, advisers didn’t need formal qualifications to give financial advice; that only really came into force a few years after I started in the industry.  Whilst I am sure the majority of the advisers were competent and trustworthy, it seems quite scary now to think that people entrusted them with their hard earned cash on experience alone.

Key things I remember from back then are:

There were far more life offices and you could actually speak to a human – you would often get a visit from the Consultant from your local branch.  They would drop off illustrations and brochures or be collecting application forms and cheques that were tax year sensitive.  Most importantly, they would always bring treats at Christmas.  We used to argue over the diaries, not something we even need now in this tech driven world.

-With Profits Funds.  Bonus rates were high and it was where a lot of pension fund money was invested.   Often there were guarantees for high levels of income in retirement; the guaranteed annuity rate that even now you still see appearing when reviewing pensions for the clients.  The guaranteed annuity rates, not the higher bonus rates!

-Allocation rates were high.  Often you could get an allocation rate of 108% for a client going into a bond with around 5% of that being paid back to an adviser in commission – with no disclosure necessary!

-High pension projection rates.  8.00% and 11.00% spring to mind giving the client a feeling of contentment that they were going to have oodles of income to live off in retirement (source: The Personal Pension Schemes (Advertisements) Regulations 1990).  I had a stint of advising between 2001 and 2011 and I remember a client showing me his very faded pension projection from when he took out his pension in the early 1990s showing him far more exciting sums than the one that I had obtained from the pension provider at the present date and the contributions had been maintained throughout.

-The Pension Review.  I spend time reviewing the transfers with a Senior Adviser and undertaking the calculations to establish who had lost out with regard to seemingly unjust advice to either transfer out of their employer sponsored scheme or to opt out from joining.  It was possible to give advice with no clear analysis having been undertaken.

Many years later, whilst the industry has moved on massively with regard to regulation and advisers needing to be more qualified and have specialist qualifications to advise in certain areas, I do find it interesting that:

-Asset allocations and underlying investment strategies of with profit funds still seem to be a “top secret” thing from some providers.

-Some providers often struggle to understand the guaranteed annuity rates they offer.

-As an industry, there is still a big proportion of advisers who compare projections when reviewing a client’s pension plans.

-The defined pension transfer market is still giving the regulator a headache!

During my 30 year career, I started out as an Office Junior, progressed into administration and I would say started “paraplanning in around 1999” when it was most definitely not a career.  I have dabbled in the world of advising and whilst I did enjoy working with the clients to help them reach their goals, behind the scenes, crunching numbers and doing the research is where my heart lies.