DB pensions transfers – damned if you do, damned if you don’t
Continuing last week’s article on DB pensions transfer business, advisers tell Fiona Bond that they feel ‘damned if you do, damned if you don’t’ offer advice.
See last week’s article Advisers tell how they are dealing with DB pension scheme transfers.
One of the issues for investors looking to obtain information around the validity of transferring their DB pension, is the dearth of firms offering advice in this area. This has led to concerns that insistent consumers might become susceptible to scams or bad advice.
The news that Intelligent Pensions and SelectaPension, as well as other firms, have suspended giving advice on pension transfers (albeit temporarily), has only served to stoke fears that the FCA is concerned about the pace at which transfers are taking place and seeking to clampdown on the market.
Neil Bailey, director, Fortitude Financial Planning, says: “There is a feeling that this is a scandal waiting to happen; maybe it will be, maybe it won’t. The trouble is if you decide to refrain from offering advice in this area you could run into trouble further down the line for not raising it with your client so there’s a sense that you’re damned if you do, damned if you don’t.
“However, in my opinion, those advisers who decide not to give advice in this area are acting negligently, as they must consider their client’s financial position in its entirety.”
He adds that he believes extending the three-month cash equivalent transfer deadline would help ease pressure, amid reports that some firms will turn into “advisory sweat shops” where the process is driven by critical yield rather than a client’s financial situation and objectives.
Bailey points to clients often obtaining their transfer value before contacting an adviser, limiting the amount of time the adviser has for the advice process. He says anything less than eight weeks left before the deadline would not be feasible.
He continues: “Each individual client should have the option to undertake a comprehensive financial plan as part of the transfer advice, and that becomes very compressed if you have a tight deadline.”
Simon Torry, managing director, SRC Wealth Management, believes that clients with smaller pension pots may be more demanding, as they will simply want to cash in and will expect the adviser to act accordingly.
He says: “Insistent clients can place advisers under pressure, but as a firm we would never take short-cuts. This is a process which should not and must not be rushed. We have received enquiries we’ve declined because the individual has obtained their quote and just wants to get their hands on the money. As a firm, that’s not how we choose to work.”
Sheriar Bradbury, managing director, Bradbury Hamilton, warns: “It is very tempting for advisers just to base the advice on generic information provided and make assumptions on the rest. Just remember that pension schemes all have their individual quirks where one date or age or definition can make a significant difference about whether the advice is right or wrong for the client.”
What help from the regulator?
Advisers will undoubtedly be looking to the regulator for guidance, following its recent proposals, but to what extent that is provided remains to be seen.
Charles Riches, director, Capital Asset Management, believes firms need to have in place a process which puts the client at the centre of everything they do.
He explains: “It’s not the regulator’s job to offer best practice; they are not an educator. There will be advisers who want a detailed breakdown of what the process should be; a downloadable guide of sorts, but that’s never going to happen.
“Firms advising in this area need to ensure that they put the client at the very heart of the decision making and not make it product-centric. It’s when you operate a ‘eat what you kill’ environment that risks start to arise and that’s what we must avoid. If you carry out the advice process properly and determine that it’s absolutely suitable, then pension transfers should not be risky.”