One of my people is currently working through the pensions claims for a client of ours. It's quite a lot of work as there quite a few plans, polices and investments and we are trying to get him a good deal and get it all nicely organised and set up, etc.
One of the plans is an old personal pension from a well known insurer with a guaranteed annuity rate (GAR). The GAR is very good - 8% I think. My colleague has 'advised' him to take this deal.
Now, if we DO NOT 'advise' him and get him to declare that he has NOT received 'advice' on taking the GAR, the insurer pays us a commission of £1,500
On the other hand if we DO advise him and he DOES declare that he has received 'advice', then no commission will be paid, but the annuity rate will not be increased. That is the insurer will trouser the £1,500. (This commission cost is built into the contract at outset).
Yes, you read that right. If we DO advise him we don't get the commission. If we DON'T advise him we do get it.
This is the consequence of the rules set out in the Retail Distribution Review. (RDR). You might not be surprised to learn that the RDR is viewed throughout the thinking part of my trade as a catastrophic failure. (See here).
Of course, the client is paying for all this failure. The incidence of regulatory imprests and deadweight costs falls on the client, not us. (FYI that cost varies between about 18% of revenue to 30% of revenue depending where your business sits in the financial services landscape).
(So what we will do here, what we are forced to do, is to game it. The client will declare that he not received advice and we will take the commission. And we'll offset it in full against our final invoice).
Kafka would be proud.