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Carl Lamb: Advisers put transfer profits before clients’ best interests

The scramble to do as many defined benefit transfers as possible while values remain high is unabated, and I am constantly amazed at how some firms have thrown caution to the wind in the hunt for their share of this – admittedly lucrative – opportunity.

The problem is that advisers are putting their profits before the client’s best interests. Despite clear guidance from the FCA that the default position should be that transfers are unsuitable, they are becoming the norm.

We all know where we are heading: indeed, if we do not find ourselves in a misselling crisis on the scale of PPI within 10 years, I will eat my hat.

Pension transfers should be signed off by a specialist with G60 or equivalent but I have heard of firms where even the most junior advisers are merrily recommending them where there are very good reasons why they should not.

It is a bit like Joe Kennedy avoiding the stockmarket crash back in 1929: he knew it was time to get out when the shoeshine boy started giving him investment tips. Everyone is suddenly an expert and has jumped on the DB gravy train. Frankly, that makes me all the more inclined to withdraw from the work entirely.

Three firms stop DB transfer advice after FCA British Steel probe

Before there is a furore about hypocrisy, let me be clear. We have done our share and our bottom line has certainly benefited from advising DB scheme members.

However, we have set out three strict parameters for every member of our advice team.

Firstly, they must follow a clear procedure to ascertain suitability, with a full exploration of the client and the scheme using cashflow modelling to support the advice, and a proper analysis of the investment outcomes for the transferred pot. Secondly, our approval process is stringent and includes sign-off by a qualified pension transfer specialist. Thirdly, we charge a fee irrespective of the outcome. So no contingent charging.

It is contingent charging above all else that puts the advice sector in jeopardy. How can you prove your advice is completely unbiased if the only way you will cover your costs is to recommend a transfer?

The FCA has an opportunity to protect the advice sector from self-harm by outlawing contingent charging for this type of work. However, it has done no more than to state it is a higher risk approach and that firms must have the necessary controls in place to manage that risk and any potential conflict of interest.

Some firms have withdrawn DB transfer advice from their proposition but the damage may already be done, and there are still many out there offering the service.

Yes, there are cases where a transfer is absolutely right for the client, but we have reached a stage where we hardly dare advise to go ahead in case it comes back to bite us later.

The majority of us will do the work to provide suitable advice but when the tsunami of misselling comes, we will get swept along with the rest.

Unless we are given greater clarity to protect our advice processes from future claims, I can see many more firms backing away.

That said, if the careful advisers withdraw from this area of advice, all those DB scheme members considering a transfer will find themselves advised by the less cautious. Then everyone loses.

Carl Lamb is managing director of Almary Green



SJP stops accepting DB transfers from British Steel members

St James’s Place has confirmed it will no long accept new defined benefit pension transfer requests from British Steel members. At a work and pensions select committee hearing this morning, it was estimated that of the 38,000 British Steel members, 12,200 have applied for a transfer value and more than 2,000 transfers have been made […]


Adrian Boulding: DB transfers need independent guidance service

The state of the defined benefit transfer market is shocking. News stories break with alarming repetitiveness of advisers withdrawing their services. If this was cowboys being driven out then perhaps we could say life was improving. But I know a number of the advice firms withdrawing and I rate them highly. Over the years, my […]


Pensions regulator eyes template for DB transfer information

The Pensions Regulator is talking to schemes about providing a standardised document to advisers requesting information for defined benefit transfers, TPR’s head of policy has said. While recognising the importance of tailored advice, Fiona Frobisher told the Money Marketing in Focus conference today that it was looking to take steps to improve the clarity and speed […]

Pension savings-2015

FCA warns consumers over risky DB transfer investments

The regulator has urged consumers to be careful when considering transferring their pensions into a new scheme. The FCA is warning consumers to be wary of any contact out of the blue by call, email or text offering to discuss their pension or a free pension review. Savers should be cautious about any unusual investments […]


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. Specifically due to the natural and obvious ‘conflict of interest’ we outsource to a fee only DB specialist who gets paid whether the answer is ‘yes’ or ‘no’.

  2. I think the DB transfer “issue” from an IFA’s perspective is surely one of prudence in order to protect ourselves and, of course, the clients best long-term interests. I am a pension transfer specialist and I will recommend a transfer if it seems a suitable course of action for the individual with the deferred DB benefit. In my experience over the last 5 years, that advice to transfer would apply to around 15%-20% of cases I have looked at, and most of these have/had “something special” going on. No clients of mine pay contingent fees, by-the-way.

    What I fear is that we are witnessing a large number of unsophisticated individuals having lottery-sized numbers waved in front of their eyes who fail to appreciate that CETVs are (supposed) representative of the cash cost of purchasing a guaranteed index-linked income for life. Whilst I can’t operate a blast furnace, and admire those that do, I do know that few people can really handle the significant investment risk and ongoing costs of flexi-access drawdown on their own. I worry for those who end up with, say, a SIPP invested in a DFM arrangement who have no real understanding of what they have got into and what will happen if and when their adviser retires. Will they still want to be in FAD in their late 70s or 80s?

    My hunch is not, but I don’t see much mention of “blended” retirement strategies when a mixture of guaranteed annuity income and FAD nowadays.

    We have also had a very good run in the markets over the last three years, driven by perhaps one-off circumstances, how will the FAD newbies feel if and when their fund falls by a third or half? That’s when the complaints will start rolling in and we will be back to the pension review of the 1990s. What goes around, comes around, alas, and we will all bear the cost.

  3. DB transfers must be handled only by firms who take will take the responsibility for the on going management of the funds after a transfer has taken place.

    Hence all the DB specialist who did as a third party adviser who handled these schemes were justifying 100% transfers and then handing clients back. Madness!

  4. I think perhaps an important point has been missed. Although (quite rightly in my opinion) the regulator has warned against these it was (and is) one of the reasons that ‘freedoms’ were introduced in the first place.

    Firms can now get rid of their long term liabilities and are happy to do so. I imagine it is the dearest wish of governments that public sector workers could do like wise, but as most are unfunded I guess it is unlikely. I believe a few are funded (local authorities, some educational establishments etc.) and if their members could be persuaded to go I don’t think there would be many tears from employers.

  5. This is just so much rubbish. No mention of what the Client may want and his own individual and personal financial goals and objectives and how many DB schemes he or she has and whether he or she is married has children, health situation etc etc.
    So much anti-IFA ‘stuff’ is published on MM, no wonder potential Clients do not trust us. Perhaps because I came into Financial Services late in life, I do not have the cynicism that others seem to?
    @John Adviser what does that 2nd paragraph mean please?

  6. The DB benefits were to provide an Income for the Employee beyond his employment or some included their direct dependants died, Pension Freedoms has created an enviourment in which the questions one must ask regarding flexibility, IHT planning, Tax planning all imply the possibility of it being right to transfer, so what’s the fuss. Do the paperwork right and it will always be right, what the problem is the Regulator understands many of those who do transfer are at risk of funds disappearing by those to whom it can not regulate, and as such makes the lives of those who it can, untenable.

  7. Whereas selling your advice firm without telling your advisers is apparently ok.

  8. ‘The FCA has an opportunity to protect the advice sector from self-harm by outlawing contingent charging for this type of work.’

    Very dangerous proposition. Be careful what you wish for…

  9. Is the FSCS funding review looking at separating out DB transfer work from other pension advice? If it’s not, it should.

    Someone setting up a £200 per month Stakeholder/PP for someone who is self employed should not have to be party to funding firms who advise on DB transfers and fail in their duties.

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