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Nationwide suspends pensions advice as RDR bites

by Rachael Revesz on Dec 07, 2012 at 11:00

Nationwide suspends pensions advice as RDR bites

Nationwide Building Society has suspended offering pensions advice due to uncertainty around the retail distribution review (RDR) readiness of its pensions proposition.

Any Nationwide customer requiring pensions advice will be referred to an independent financial adviser for the time being, although the building society is planning to recruit a further 100 advisers next year.

The company has withdrawn the L&G (UTM) Stakeholder Pension Plan it offers through its branch advisers as it cannot facilitate adviser charging.

Guy Simmonds, Nationwide head of product, protection and investments, said the company hoped to have an RDR-ready pension proposition in place by early 2013.

‘We have had to sacrifice the pension proposition at the moment,’ he said. ‘Given the regulatory uncertainty on pensions we wanted to confirm what our requirements were.’

‘In the meantime we can’t advise on pensions, we’re circling back on the project timeline and have things to assess,’ he said.

Simmonds said he was 'putting pressure' on his business analysts to find a solution but wanted to develop a proposition which would work under the RDR, meet auto-enrolment needs, and be flexible enough to with stand changes in pensions regulation.

Simmonds said that the building society planned to grow from 460 advisers to ‘north of 550’ next year and planned to roll out its restricted RDR proposition over the course of this month.

He said Nationwide planned to charge 3% initial fees and 0.5% for ongoing advice after the RDR.

For pensions advice customers will be referred to website Unbiased.co.uk.

41 comments so far. Why not have your say?

Phil Castle

Dec 07, 2012 at 11:07

Bit late in the day to realise there is a porblem.

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Vinylman

Dec 07, 2012 at 11:17

Another new phrase - "we’re circling back on the project timeline" - like it!

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Sam Matthews

Dec 07, 2012 at 11:17

How many annoucements like this are we going to see over next 3 weeks? Phil - I doubt they have only just realised they have a problem - my guess is they have known this was a risk for months and have probably been trying to do everything they can to get it ready for 31/12 but have simply run out of time. I think we will see quite a bit if this.

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Chris Geeson

Dec 07, 2012 at 11:25

"Circling back on the project timeline" is that the same as a plane being unable to land due to fog and circling until it runs out of fuel. Several others are going to jump on this bandwagon as an answer I bet.

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Scrapheap2012

Dec 07, 2012 at 11:29

I recently reviewed a clients Nationwide advised L&G stakeholder pension. He was entirely invested in a 1% AMC L&G (N) FTSE tracker, there are only 2 other funds available - Corporate Bond and Cash.

Included in the charges 0.2% trail to Nationwide tho no adviser been in touch since the plan was taken out 10 years ago.

Too right they need to look at this plan for RDR and auto-enrolment world.

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sol trader

Dec 07, 2012 at 11:40

I also used to arrange stakeholder pensions for clients believing they had to be a good idea if the omniscient regulator insisted they be considered first and foremost. Turned out, I earn nothing for it and they are just as risky (potentially more so due to the lack of ongoing advice and general non commitment from providers) as any other pension.

I assume, in future, it will only be possible to make money from SH pensions and auto-enrolement schemes by vertical integration or expensive bank accoutn cross subsidies.

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Phil Castle

Dec 07, 2012 at 11:42

@scrapheap - to be fair, the 1% stakeholder charge wasn't supposed to cover the cost of advice, so no ongoing advice isn't really surprising. What would Nwide's advice have been, a, b or c fund or a change in the split between them!

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Jonathan Kirby

Dec 07, 2012 at 11:49

3% + 0.5% sounds a tad like the old commission model to me and how about discounts for larger amounts to reflect the actual cost of advising?

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JonnieB666

Dec 07, 2012 at 11:53

That's good news and I hope all the big boys follow suit with that level of charging.This should make most small IFA's look very competative.

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JStevens

Dec 07, 2012 at 11:57

What particular 'regulatory uncertainty' are they referring to?

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Gerry Cooper

Dec 07, 2012 at 12:20

Given that a majority of N/W customers are unlikely to be attractive to IFAs, and also that, in terms of 'Banking Ethics', Nationwide is at the 'respectable' end, it has to be seen as a negative that they are not servicing their clients for a while.

As to their charge structure, and given that their Sales people will be paid a salary, and will need to contribute to Branch profitability, a 3% + 0.50% charge on contributions of say, £150 - £250 per month is probably a minimum requirement. There will remain the danger though that the need to make it profitable will lead to pressure to meet targets, and thus poor selling methods. On the other hand, that's probably going to remain true of larger IFAs with sales forces as well.

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Rich

Dec 07, 2012 at 12:27

'regulatory uncertainty'

I don't know what its referring to either but i suspect its a PR term for 'we messed up here but we can make it sound like it's not our fault'

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Julian Stevens

Dec 07, 2012 at 12:28

What's the point of Nationwide continuing to offer advice on:-

1. a junk product from

2. a provider whose admin is amongst the worst in the industry,

3. that incorporates no facility to pay the seller and which

4. hardly anyone wants anyway?

Nationwide can't advise on (OM) At Retirement options either, so really there's no mileage in continuing to be involved with pensions at any stage or at any level.

Just be honest Nationwide and admit it.

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Brads

Dec 07, 2012 at 12:37

Very surprised that Nationwide has been "caught out" with this. They nust have known for ages that a SHP cannot facilitate adviser charging. So, why not have a individual pension plan they can advise on, if they feel they can charges direct fees? They are normally lower charged anyway and have more flexibility. Strangely I think it may be the likes of the Nationwides that prove to be far less prepared for RDR that the samller intermediaries

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Brads

Dec 07, 2012 at 12:38

sorry should have read "if they feel the CANNOT charge fees direct"

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Philip Wise

Dec 07, 2012 at 13:17

I dont understand. If I went to Nationwide wanting advice on, say, how my NHS pension is affected the annual allowance, why would it make any difference what L&G pay them for something I dont want?

Surely they dont mean that they have suspended sales of L&G pensions, do they?

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John Boy

Dec 07, 2012 at 13:23

Having been on the hamster wheel at NW this is a convenient excuse to get out of pensions, a pension at Nationwide is called an ISA due to their unique holistic planning service (irony!) pensions never paid at the society and advisers were always told to actively not sell them as they did not earn anything for anyone.

The earlier comment about NW being at the respectable end of banking ethics has just made me laugh out loud... and i would actually say the opposite of many of their customers being unnattractive to IFA's there are so many who would benefit from full financial planning but are slaves to these high street names.

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Sam Matthews

Dec 07, 2012 at 13:24

Banks 'sell' rather than give 'advice' so would be interesting to see what they said if you asked them about your NHS pension. Yep they mean they have suspended sales of L&G pension

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Paul Stocks

Dec 07, 2012 at 13:35

Interesting points made above and in particular by Sam.

RDR is aiming to drive a wedge between advice and product 'sales'. Whilst I'm sure it wont always succeed it will hopefully lead to clients understanding the adviser's stance on advice (restricted or otherwise), what are they charge and why - not least because they will see that advice charge being deducted from their hard earned money!!!

I'd like to see nationwide make 3 plus a half work if clients only have a small fund to review. It's also disappointing to see the comments above concerning the use of ISAs - a perfect example where a client and an adviser have a conflict of interest.

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Gerry Cooper

Dec 07, 2012 at 13:56

@ John Boy - You worked for them, so you'd know better than me, but I have to say that, having seen advice from all the Banks over many years, I would still take the view that N/W is at the very least, at the least bad end of the scale.

And Philip/Sam, if you asked that question at N/W or most banks, I think you'd get a blank start, a pink face, and a hurried attempt to pass you on to someone else, as I suspect you already know!

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Smudger 2

Dec 07, 2012 at 14:06

Selling is a form of communication. Advising can be a method of selling. I don't think there is much concern about selling what a client needs , the issues arise around selling a product the client doesn't need.

If a client who needs a pension and is doing little about it meets an adviser and buys a poor pension he will still gain tax relief that could otherwise be lost.

Once in possession of a pension the client has a point to start from.

People get around on substandard transport but they can still get to work. We don't take the transport away until its perfect.

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Simon Kershaw

Dec 07, 2012 at 14:13

Nationwide at the respectable end of the bancassurance sales-pit?

That would be why they load L&G term premiums purely to ramp up commission on an already high value sale.

Truly appalling.

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Smudger 2

Dec 07, 2012 at 14:22

This then is their Nemesis.

Nationwide's politics is also truly appalling.

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Hickky

Dec 07, 2012 at 14:38

Just typical of banks mindset. Oh dear, we cannot make a profit out of selling in this particular area of financial advice, so we will not do so. This means no customer will be able to be provided with a proper service, and all advice will be limited to the few product areas they can see a profit on. So the decision is not to do with customers needs, it's the bank/building society's needs. If they are so client friendly as they advertise, let them rebate all their trail commission back to the clients and write them a letter to advise them to see an independant FA, not one who will rebate fees back to Nationwide.

Even better, like Barclays and others, get out of all investment and protection advice altogether.

As Nationwide is supposedly run for the benefit of customers, do your customers a big favor.

But we really know the society is really run for the benefit of the overblown management staff.

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John Smyth 3

Dec 07, 2012 at 16:23

Don't worry guys they will be operating just like an SJP outfit very soon.

They will find a no advice product like they sell the Axa over 55 product. They will produce a leaflet with little tick boxes to tell customers they do not charge fees but do get paid commision to cover their expenses but don't disclose just how much.

They have no scruples at all. Their only interest just like the banks is profit even though they go to great lengths to tell customer they are a mutual who put customers finterests first. The only interests they put first are those of their highly paids at the top of their tree.

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Greg Thomas

Dec 09, 2012 at 10:16

Oh Dear!

Where will all those bearded, be-sandalled, tree hugging real ale drinking schoolteachers going to get their 'advice' from now I wonder?

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Hickky

Dec 09, 2012 at 17:02

@Gregg

They cane come to me, I have a range of ethical funds to suit all according to their percieved opinions. I am not sure that Nationwide could provide these persons with so well targetted advice anyway!

I will always re-configure a part of my business to non-profit orginisation. However my salary and expenses will ensure there is no profit, I learned this from firms like Nationwide.

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David Hatton

Dec 10, 2012 at 02:30

Brilliant Penfold!

Are these Improved customer outcomes following RDR Mr. Sant's?

Over the last 2 years the mass market advice providers have put 2 fingers up-to the FSA & it's inept regulatory tinkering by telling them they are not prepared to play their games by removing advice & culling adviser numbers, HSBC, Lloyds, Barclays, RBS & now Nationwide to mention just a few.

How big does the pension gap, savings gap & protection gap have to get before they realise joe pubic are not prepared to pay or are in a position to pay for advice. It death by a thousand cuts ( literally).

NB. Don't be misled by my sympathy for the institutions as I feel they are the worst providers of advice, however at least joe public has access. Sorry past tense intended HAD.

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David Hatton

Dec 10, 2012 at 02:31

Brilliant Penfold!

Are these Improved customer outcomes following RDR Mr. Sant's?

Over the last 2 years the mass market advice providers have put 2 fingers up-to the FSA & it's inept regulatory tinkering by telling them they are not prepared to play their games by removing advice & culling adviser numbers, HSBC, Lloyds, Barclays, RBS & now Nationwide to mention just a few.

How big does the pension gap, savings gap & protection gap have to get before they realise joe pubic are not prepared to pay or are in a position to pay for advice. It death by a thousand cuts ( literally).

NB. Don't be misled by my sympathy for the institutions as I feel they are the worst providers of advice, however at least joe public has access. Sorry past tense intended HAD.

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Jonathan Kirby

Dec 10, 2012 at 10:14

And today I see Santander have suspended their entire sales force of 800 pending RDR training.

Where will it all end?

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Christopher Petrie

Dec 10, 2012 at 10:22

I've always thought that RDR is the enemy of the banks and with the news from Santander and now Nationwide, it's clear that over time their "customers" will start to see exactly how much these companies are charging.

I suspect 3% initial fees may be at the higher end of the scale and some IFAs will be able to undercut that (if they wish to of course). Equally, if NW do nothing for their 0.5% p.a. fees, the clients can stop the payment r switch to an IFA who will do something for the ongoing charges.

What will surely stop is that banks/building societies can pretend their advice is "free", no doubt a shock to many of their "customers" and quite probably the reason why Santander needs it's advisers to go on a new training program.

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Gerry Cooper

Dec 10, 2012 at 11:40

@ Chris Petrie - There's no doubt that the Banks charge/fee structurte will be at the upper end - it will have to be, to support their bloated structuresand the need to show a profit. I think it's going to be very interesting to see how their customers accept paying them a fee or specific charge of any sort, and like you, I just don't see it working long term, so as you say, they may well be knocking on our doors in years to come.

For lumps sums and transfers, I have been charging no more than a 1% setting up fee, less for larger sums, for some time now, whether as a % fee, or on a time/cost basis. As a small firm, I don't need to charge at a higher level.

What I haven't done for a number of years, is regular contribution business of any sort, and never at the 'lower end', which has been the 'natural' market of the Banks and Building Societies and perhaps to an extent, certain parts of the IFA market, which will now have to think again, without indemnity commission, and frankly, I a) don't want to do it, and b) couldn't justify anything other than a small charge for doing it, at least until a decent fund had built up.

We all live and learn, and I think you will recall a well regarded Life Office, whose PPP contract featured an Indemnity commission earning period of just 12 months, which attracted consistent top quality business for all the right reasons didn't it? Well no, of course not, and they paid the price for that and other Management errors didn't they?

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Christopher Petrie

Dec 10, 2012 at 12:13

Hello Gerry

They were the days eh?

But times change and we have to change with them of course. Otherwise - well, we both know that story of course.

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Richard Hardy

Dec 10, 2012 at 15:21

Call me Mr cynical, however, was it not the intention of the FSA to get rid of the small firm and corral the consumer toward the banks.

The banks in turn would cock-up on a large scale allowing the FSA to obtain an income stream from numerous on-going fines.

Is this response to the FSA by the banks going to say to them 'Hang on, this is not what we intended' resulting in a change to let the banks in on the party via the side entrance!?

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Simon P via mobile

Dec 10, 2012 at 15:36

@ Richard hardy. Mr daft may be a more appropriate moniker than mr cynical. These stupid theories are getting ridiculous. No matter how much we hate the FSA to suggest they thought up RDR simply to increase their ongoing fines is frankly moronic. I presume you also beleive that the moon landings were made up by the Americans. Give me strength

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Greg Thomas

Dec 10, 2012 at 22:46

Bloody hell, Simon; you mean they weren't?

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Richard Hardy

Dec 11, 2012 at 10:21

@ Simon P do you think IFA's are going to fund the massive money pit that is the FSA?

Where do you think their funding will come from in the future?

Let's wait and see.

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Richard Hardy

Dec 11, 2012 at 10:29

@ Simon P - Forgot to mention - never presume.

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Simon p via mobile

Dec 11, 2012 at 10:59

I agree there is a major funding issue with the fsa but to think the fsa came up with RDR just to raise more funding from the banks is just plain stupid. You are right though - I shouldn't have assumed you thought the moon landings were fake. Only an idiot would think that. Er......

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Julian Stevens

Dec 11, 2012 at 11:18

The posts here seem to have gone a bit off piste, but I agree strongly with the observation that there is a major funding issue with the FSA. By virtue of the fact that the FCA will be largely the same people doing the same jobs on the same remuneration packages in the same monumentally expensive offices (£68.5m p.a.), this looks set to continue unless pressure is applied from Parliament for something to be done about it, not least to conform to the requirements of the Statutory Code of Practice for Regulators. This item of legislation requires regulatory bodies "to use their resources in a way that gets the most value out of the effort that they make, whilst delivering significant benefits to low risk and compliant businesses through better-focused inspection activity, increased use of advice for businesses, and lower compliance costs". So far, we've seen damn-all of that happening.

A good start might well be to move three quarters of the present staff well outside London to vastly less expensive office accommodation. The list of other measures that could and should be taken is long.

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Richard Hardy

Dec 11, 2012 at 13:29

Cheers Simon a good bit of friendly banter :-)

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