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Editor’s note: No easy wins for a perfect DB transfer suitability report

Eventually, there will come a time when I stop having to write about defined benefit pension transfers. It will be a quieter, simpler time, where the last vestiges of gold-plating are gone and deferred members no longer exist. Unfortunately, that time is not this week.

Workshops, seminars and training days have exploded across the UK to help advisers write better suitability reports for their DB transfers. Speaking to advisers and compliance professionals in recent months, it’s obvious how difficult it is to get these reports right, and a picture is finally emerging of what is in the ones that do it well, and in the ones that don’t.

The FCA is in a bind. The last thing it wants is to have a series of blank sections headed simply ‘Insert client details here.’ There is a real worry this could lead to lazy advice, falling into the same trap that the regulator warns on so much: a tick-box mentality and advising for compliance’s sake, not the client’s.

It can’t appear soft on report writing either. Whereas many advisers got away with an ‘unclear’ rating in the FCA’s wider suitability review — where the regulator said it didn’t have enough information to decide one way or another — DB transfers are such a momentous decision that to have insufficient data with which to judge compliance would seem a huge oversight itself on the part of the adviser.

When transparency has just been thrust onto fund charges so consumers know exactly what they are buying, it would be completely incongruous not to have this for one of the biggest decisions of their financial lives.

Spotting the bad is often easier than spotting the good. Our research for this story dragged up more, almost comical, stories — of clients being quoted verbatim in reports that they wanted the “comfort of using a discretionary fund manager with tactical asset allocation”, when the chances were they had zero idea of what either of those things was.

Another great example came from a conference we held late last year, at which the FCA said it had seen reports where a client’s documented objective was “to have access to more than 1,000 funds on a platform”.

That’s not an objective by anyone’s semantic standard. It’s not even close to documenting how a human being actually interacts with their adviser.

It’s incredibly important that advisers continue to discuss best practice with one another because, at the end of the day, when the complaints come, it’s the suitability report that has to do the talking. We hope we have gone at least some way to furthering that conversation.


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