On setting the bar
Recently, I ordered a special gift to be sent to my parents on their wedding anniversary - partly as an act of contrition as I was going to be out of the country at the time. Now, this wasn't any old anniversary - this was their Diamond Wedding anniversary, representative of that impressive life-commitment involved in traditional marriage. Since this was going to involve a card from the Queen, it seemed important that our contribution was sufficiently up to scratch - so the gift included a bouquet of flowers, a bottle of chocs and a nice bottle of wine, thus ticking most if not all of the relevant boxes.
Now, the thing about this kind of event, and the gift marking it, is that it's only relevant on the day - which, in this case was the 19th. Not the 18th, not the 20th. The desired outcome - happy parents on their wedding anniversary - is only relevant on the 19th, otherwise it's just some other delivery by a courier. And that's where our careful advance planning all went wrong - the high-class supplier we had used simply did not turn up on the 19th, despite having very precisely booked the date for the delivery. Staying in Italy at the time, I realised that something had gone wrong when I received an email from my dad, very pointedly thanking me for the card - so I knew that, somehow, we had blown it.
In fact, the delivery-driver turned up on the 20th, oblivious to any of these ramifications. I was left fuming, and on my return contacted the supplier to highlight the unfortunate outcome. So, the question is, to what extent is the supplier liable in such cases? You could argue that I had ordered flowers, choccies and wine - and they had delivered precisely those items. A tick in the box. Or, you could argue that this was an 'anniversary' gift, and we'd booked the specific day for it to be delivered. So, is this a slightly-impaired outcome, or is it a Total Failure? I argued that it was in fact the latter, and (thankfully) the supplier has agreed - a supplementary bouquet is being dispatched and I am receiving a complete refund. Being the cheapskate I am, that does partly redeem the situation.
There is a similar kind of quantitative challenge facing us as financial planners. There may be those cases where, due to what may seem in hindsight to be completely inexplicable reasons, we actually manage to tick every box - our advice, and the proposed outcomes miraculously hit the sweet spot. Often we are tempted to attribute such outcomes to our own innate genius, but it's pretty likely that we'll be kidding ourselves. In practice, due to the kind of world we live in, and because of the complicated, messy circumstances of our clients, the outcomes we deliver will be a reasonably close match for what we had hoped, but we'll be aware of quite a bit of pragmatic padding within the overall picture. We can live with that, because we are intent on fostering long-term financial-planning relationships, where the rough edges can be refined over time. Providing we do not make exaggerated and insupportable claims for our expertise, our clients will live with this too.
There are other scenarios too, where the risks of impaired outcomes are higher - perhaps where hitting any target whatsoever below an identified level is representative of failure. Does our advice achieve, as a minimum, a given outcome of 'X', or does it not? If the latter, then we have failed to deliver, a bit like our diamond wedding gift-supplier. I think it is a helpful exercise for Advisers to consider the sorts of contexts where this is more likely to happen - partly to better enable you to contrast such scenarios with the others (where impaired outcomes are less critical), and partly to prepare you to take responsibility and allow for redress. At the very least, it seems essential that Advisers have in their own mind a very clear perception of the kinds of outcome they are seeking to generate for their clients, that they have the means to quantify or measure such outcomes - and then document them clearly to clients.
The FCA has published its finalised guidance on the calculation of redress for unsuitable defined benefit pension transfers
ValidPath Members can read our update and download the detail by clicking here