HERE’S a conversation that was overheard one afternoon lately in a hotel - a husband and wife were discussing going out to meet friends that evening.
He: ‘You could wear that blue dress you bought the other week. I’m just going as I am.’
She (pointing): ‘You are NOT wearing that awful tie. I’ll pick one out for you, when we go upstairs.’
This is a perfect example of the difference between ‘guidance’ and ‘advice’.
They say that guidance describes your options, ie tells you what you could do (wear the blue dress), while advice is telling you what you should do (put on the tie I will give you).
It’s not hard to see that full-on advice provides a much higher level of protection from potentially disastrous outcomes (such as looking like an eejit and/or annoying your wife).
Which brings us to the Parliamentary Work and Pensions Select Committee (aren’t they good at snappy titles in London?). Their new report calls for legislation to make sure that (as a minimum) guidance, but preferably full advice becomes the norm, for people making monumental pension decisions.
The report was warmly welcomed by former pensions minister Ros Altmann, but its findings did elicit one scathing observation about the pensions situation in the past. She said that decades of saving without advice had put ‘providers in a powerful position to push consumers into poor products.’
She believes that this was bad enough back in the days when we were rolled into buying an annuity, as being sold the wrong one could cost you dearly.
However it’s even more serious today, where we have the freedom to draw down money from our pension to spend or re-invest. Now, the choices are huge, and the stakes really have gone sky-high.
There are already many sad tales that show the road to hell is paved with non-advised financial decisions.
As we have said many times in this esteemed column, our new-found freedom (well, since 2015) to access our pension cash is a two-sided coin, balanced on a double-edged sword.
With the benefits of greater choice, we risk attracting the attentions of unscrupulous criminal elements – better known as ‘scammers’ - just dying to get their hands on our retirement savings. No show without Punch.
Which brings us to the second key recommendation in this important report: that ministers bring in an immediate ban on pensions cold-calling.
This is topical this week, as one of the leading UK investment houses has just become the latest victim of a ‘clone scam’ where bogus operators ring consumers, impersonating the legitimate company, in an attempt to get your financial details.
This latest one brings the number of high-profile clone scams in the UK during 2017 to six.
The financial regulator (FCA) commented: “Fraudsters usually use this tactic when contacting people out of the blue, so you should be especially wary if you have been cold called.”
This was echoed by Ros Altmann, who said: “All pension scams I have seen start from an unsolicited approach of some kind.”
The approach may be a brochure in the mail, a phone call offering a free pensions review, or a too-good-to-miss investment opportunity such as a shares investment or an overseas property development.
Now, my heart is broke warning readers of this paper that reputable investment companies do not ring you with unmissable offers.
However, as Ros Altmann points out, the benefit of outlawing cold-calling would be that it would ‘give a clear message to the public that anyone contacting them out of the blue about their pension is breaking the law, so do not engage with them'.
This is why it is crucial to go to an independent financial adviser, and take ‘advice’ rather than mere ‘guidance’, when making decisions about your money. And we won’t even mention your tie.
::Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005 . Further information on Facebook at Kennedy Independent Financial Advice Ltd
