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The FCA this week revealed plans for changes on DB transfer advice, including scrapping guidance that the adviser should start from the assumption that a transfer will be unsuitable.

The proposed changes also include requiring transfer advice to be provided as a personal recommendation, and replacing the current transfer value analysis with a comparison to show the value of the benefits being given up. 

Claire Trott, head of pensions strategy at Technical Connection, gives her view on the story.

DB transfers – this has been a long time coming

I started my career doing pension and FSAVC review calculations, I took what I had learnt and moved into advising on pension transfers both for direct clients and on behalf of other advisers.

This background has given me a good foundation in what the FSA then, FCA now, were looking for within their suitability reports.

I have to say up until the pension freedoms I agreed with their stance on most of it, but things change and now over two years later the FCA seem to have finally noticed.

The most recent consultation paper CP17/16 is most welcome in my eyes as it gives the advice profession a chance to give some real life input into what the FCA deem suitable for a changing world.

The biggest and most welcome change is the fact that the FCA recognise that the starting point for advice should be neutral and not deemed wrong for the client. It has felt to me, that starting from a negative would nearly always mean that should there be an issue down the line, then the adviser would be on the back foot.

Adding to the guidance on suitability and personal recommendations can only be a benefit to advisers so they know what is expected. For too long there have been things that the FCA have expected but were not clearly documented, such as guidance and not rules.

It has been implied for a few years now that the receiving scheme and underlying investments must be included in the transfer or conversion advice, but adding this to the actual guidance will remove any doubt.

The majority of advisers would do this by default, as they would be advising the client holistically, but for those who may only be undertaking the transfer as a standalone piece of work, it will ensure that the whole picture is looked at in detail.

In many cases the transfer may be suitable if the client is investing in one portfolio or asset and unsuitable should they decide on another route entirely. Given death benefits have always been, and are increasing, a catalyst for transfers, it is again good to see that they are addressed in the guidance on suitability.

An overhaul of Transfer Value Analysis (TVA) is long overdue, being unchanged since the introduction of pension freedoms where the purchase of an annuity became the least likely option at retirement, if at all in the client’s lifetime.

The proposals focus more on what the client needs rather than what they are giving up, which is a positive and will help advisers in their conversations with clients.

It is on a regular basis that we hear that the adviser can’t recommend a transfer even though the client doesn’t need that level of income in their retirement.

On first read, the majority of the consultation makes sense and I hope that advisers and providers will respond in full to help the FCA make the appropriate amendments, to give freedom to pension scheme members while protecting them and their advisers from harm.

 

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I attended last week’s CISI / IFP Paraplanning Conference at Hinckley in Leicestershire. It was a big success and yet...something is still missing from the burgeoning Paraplanning profession and something quite big. It needs a new direction.

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I’m assuming that many of you have been in financial services/planning/advice for many years. It’s easy to get desensitised to the jargon, language and mental constructs that pervade our industry.

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Pensions are at the mercy of many areas of legislation and the unintended consequences of this seems to be hitting areas of pensions more and more and things get even more complicated.

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If you want my contemporary take on the designations, I think both CFP and Chartered are impressive as far as they go. With great respect for each, my personal preference is toward the CFP with its dedication to actual planning and its more holistic approach.

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The CISI's Financial Planning Week, which gets under way today, is by far the best campaign of the year in terms of encouraging consumers to learn more about the benefits of sound, long term Financial Planning in its widest sense.

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Two years on from the introduction of Pension Freedoms, a new report finds many SME owners have unrealistic expectations of how much their pensions and businesses will contribute to their retirement, writes Clifton Asset Management’s Anthony Carty.

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We're a tough breed in journalism but the death of Succession founder Simon Chamberlain shocked and saddened me deeply recently - as it did many readers who contacted us. Despite this I believe Simon's death teaches us all many lessons but perhaps not the obvious ones.

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