Final Salary DB Transfers Enquiries
Having spent 25 years of my career as an adviser and advised on my fair share of pension transfers (final salary) over that period. I have also been undertaking the research and analysis on final salary DB transfers on behalf of financial advisers, within Paraplanning Hub, for nearly 4 years now, so I think I have a decent grasp on such matters. That still did not prepare me for the recent responses I received from advisers keen to accept DB transfer enquiries from us.
As way of background, we receive a steady flow of enquiries from overseas advisers looking for suitable UK DB transfer advice. They know we are not regulated to give advice but trust our opinion on such matters and the fact that we are detached from the outcome. To date, I have passed the majority of these enquiries to a small number of trusted IFAs who share our detached view and trust that my opinions are backed up by robust research and evidence. However, we have recently started receiving more enquiries than my trusted advisers can cope with, so I opened this out to others.
To say I was surprised with the outcome would be an understatement! The vast majority immediately focused on the product selection, ongoing servicing needs and concerns over PI and liability. I get the last concern (although if the advice is robust it should not be) but I am confused over the first two.
Firstly, the default FCA position is not to transfer a DB pension, so the vast majority of cases should be a ‘do not transfer’ recommendation. Meaning there are no product recommendations or ongoing servicing needs.
My experience point to 80% of cases being deemed a DNT and this is backed up by some of the UKs best compliance consultants. Which means, if there is a lack of evidence to support a transfer now, a DNT is the most appropriate or safest recommendation. Consequently, as long as the IFA is not then stupid enough to get involved in ‘insistent client’ cases there is no risk to the IFAs business.
Secondly, for the few cases that do involve a positive recommendation, in other words the evidence is overwhelming (poor health, evidence of surplus guaranteed income, no other way to achieve a viable objective, etc.) the UK adviser really is not required to provide an ongoing service or product recommendation.
Let, me go back a little, these are cases regard individuals who are now resident in, and citizens of, countries such as NZ, US, Australia, and Canada. The last time I looked there are very few UK IFAs who registered to give financial advice, i.e. recommend specific products, to these citizens in their home jurisdiction. Also, they already have a regulated professional adviser in their home country who is more than competent in providing such recommendations.
The UK adviser does have a duty of care to ensure any product recommendations are suitable for the individuals objectives, risk profile, capacity for loss, knowledge, and experience, as well as to ensure what is recommended is enacted. In other words, if they receive the specific recommendations and assurances that these will be enacted in that form from the regulated adviser in the home state, the UK adviser can accept these as suitable.
I would not stretch the above to include ‘advisers’ in Europe and the Middle East but I would expect a regulated adviser in a country with regulations at least equivalent to the UK to be a trustworthy individual.
My conclusion is that too many UK advisers are still approaching transfer cases with the end in mind, i.e. a focus on the product and the ongoing adviser fees, rather than the project in mind, i.e. is a transfer suitable or not. Sadly, this also appears to back up the FCAs concerns that potentially 80% of transfer recommendations to date are potentially unsuitable.
For those of you who do not agree with me then I guess you will not select me to do your paraplanning! For those that do please feel free to DM us.