I feel like I’ve written about defined benefit transfers about as often as Theresa May broke out her “strong and stable” catchphrase at the last election.
But with a final policy statement from the FCA last week putting concrete reforms into place, we must dance the DB transfer tango once again.
The good news is that, whatever you may think of the FCA, at least it is showing a strong level of consistency with its latest recommendations.
A new requirement to provide a suitability report even if the advice is not to transfer sits neatly with the FCA’s post-RDR view of financial planning as a holistic pursuit, where advisers can happily charge for services that are completely divorced from product sales.
Despite constant protestations to the contrary from the advice community, the FCA is not a price regulator, and it has made it abundantly clear it wants to stay that way on a number of occasions.
It has repeatedly said that high charges do not necessarily mean advice is unsuitable, and that it is not in the business of telling planners how they can charge. Hence it has decided not to impose a ban on contingent fees.
In some of its earliest warnings on poor DB transfer advice, the FCA reminded advisers to ensure that the eventual investment recommendation was suitable, even if outsourcing some parts of the process to a third party. The regulator’s new rule that pension transfer specialists must hold investment qualifications follows quite naturally from that.
The one area that it does not appear quite as co-ordinated is on where triage – or impartial information to guide consumers at the start of the DB transfer journey – ends and advice begins.
The FCA has now said that providing clients with a transfer value may count as advice, so advisers should be wary of using it in a pure triage process.
However, others have recently called on trustees to flag the availability of transfer values in routine member communications, because they would help members to understand their options and there is no rule from The Pensions Regulator saying that this kind of support would constitute advice.
Hopefully, this is a technicality that can be resolved fairly swiftly, and the FCA has promised further guidance on the nuances of triage going forward.
So while the regulator remains guilty of acting too late on the problem, at least it has made an honest attempt to navigate the tricky path between rocks and hard places in the DB transfer market.
Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1