Over a quarter of pensions operators (27%) declared that the appropriate communication of information to policyholders in pre-, at- and post-retirement phases, was the sole responsibility of the adviser, effectively washing their hands of this communication.
IFAs responsible for pre-retirement communication?
This was particularly stark for pre-retirement communication which nearly a third (31%) of providers said was the adviser’s responsibility. That said, there is a nagging concern that providers are most at risk of Disclosure non-compliance: 52% of respondents thought that they were most ‘at risk’ while 31% (perhaps the same providers) thought adviser firms were more exposed.
Provider response to FSA request for asset-level pensions projections slow
Just a quarter (26%) of providers is offering the more detailed and accurate illustrations requested by the Financial Services Authority (FSA) in its Thematic Review of SIPP operators, published in September 2009. Nearly half (44%) still do not intend to offer asset-level illustrations this year. The remainder (30%) are intending to put new illustrations in this year to tackle this issue.
For a link to Imago Front Office Version 4
Wake Up pack won’t reach all of us
Another disclosure requirement from the FSA – the so-called ‘Wake up Pack’ – is now offered by 48% of providers surveyed, while over a third (35%) are putting this in this year and more than one in six (17%) aren’t prioritising this sufficiently to put it in this year.
Unbundling of charges almost universal
By contrast a more impressive 61% of providers have already completed work on systems to enable unbundling of charges so that it is clear to policyholders (specifically platform users) what percentage of charges associated with a transaction are going to the IFA, investment firm, administrator and platform itself. A further 22% are looking to make this possible by the end of 2010.
Not spotting abnormal investment transactions
A quarter (26%) of providers does not have systems in place for spotting abnormal investment transactions despite this being a requirement of the FSA
Corporate SIPP on the up
On market trends, six out of ten (61%) providers predicted an explosion of the corporate SIPP market from 2011 and 30% of the market is already gearing up for this, as Defined Benefit schemes continue to be considered as dangerously expensive corporate liabilities.
Solvency II preparations slow
More than a sixth (17%) are building risk management systems to assess solvency risk exposure more accurately in line with Solvency II requirements. 39% said they were still preparing plans for Solvency II compliance and more than a third had no plans to devote any resources in this area at all which is surprising given that we are still suffering in the worst recession in over 50 years, largely because the banks did not properly understand their risk exposures and failed to properly value the assets their investment arms were investing in. The final deadline for full implementation of Solvency II is October 2012, so financial services firms have 16 months to get their house in order.
Efficiency drives
More positively, 35% of providers are focusing over the next three years in launching new product on existing systems, while 26% expect to remain focused over this period on improving processes, systems and operational performance.
TCF compliance requires more BI & MI
Priorities for ensuring compliance with Treating Customers Fairly (TCF) principles were building Business Intelligence systems which give them a more holistic view of customer communications (top priority for 39%) and the next highest rated issue (top priority for 22% and second top priority for 26%) to support TCF compliance is illustrating that Management Information (MI) is properly linked to key business decisions. Reports on timeliness and quality of service levels in administrative processes were also being prioritised (rated top by 26% and second top by 13%) for TCF compliance.
The most costly operational processes amongst providers today is MI reporting followed by asset migration work (most notably transfers out). Banking and investment management costs are not far behind. MI reporting generates the most exposure to risk for providers’ businesses, again followed by at-retirement transfers out processes.
Cutting product costs
The audience was split on how it was aiming to reduce the cost of products to clients: 31% said that they felt they would do this by investing in better administration systems; while 17% were aiming to reduce costs by automating more processes. 39% said they did not think product costs needed to fall significantly.
Chris Read, chairman, Dunstan Thomas Holdings, explains:
“Effective disclosure which gives customers more accurate and timely information which in turn stimulates further and more sensible long-term saving for retirement, is the key theme of the regulator right now. That is why we have devoted resources to taking a snapshot of where providers are on the disclosure journey.
“Our findings reveal that operational risk management is traveling further up providers’ agendas and that the cost of compliance is continuing to rise. Providers are now looking for ways to cut costs through automating systems and improving administrative processes.
“Yet providers have not fully faced up to their responsibilities around policyholder communications pre-, at-and post-retirement. There is a good deal of confusion about whether the weight of responsibility lies with the IFA or with the provider. There is a great deal of food for thought here for the FSA, or its successor, after the upcoming election.”
