FCA visits DB transfer advisers as supervision stepped up

The FCA is stepping up its supervision of defined benefit transfer advice as fresh data shows a significant majority of clients are being told to transfer.

The regulator has revealed the results of a data collection exercise this morning, which shows that of the 234,951 scheme members that had received advice on transferring between April 2015 and September 2018, 162,047, or 69 per cent, had been recommended to transfer out.

This compares to the 72,904, or 31 per cent, that had been recommended not to transfer.

Of the 2,426 firms had provided advice on transferring their DB pension, 1,454 had recommended 75 per cent or more of their clients to transfer.

A total of 59,086 clients who did not proceed to full advice after a triage process.

Of those advised not to transfer, 13 per cent went ahead as insistent clients. Of everyone who transferred, 70 per cent continued to receive ongoing advice from the firm that recommended it.

Though the regulator notes that the data is and of itself does not indicate the suitability of each transfer, the high levels of transfer recommendations fly in the face of the FCA’s position that transfers are likely to be unsuitable in most cases.

The regulator writes: “The FCA has repeatedly made clear its expectations of financial advisers as well as strengthening the rules around pension transfer advice. Despite this, too much advice the FCA have seen to date is still not of an acceptable standard.”

The FCA says it has begun visits to firms, with those most active at the top of the list, and will also be writing to firms where the data they supplied suggests customers may be at risk of harm.

FCA supervision director Megan Butler says: “We have said repeatedly that, when advising on DB transfers, advisers should start from the position that a transfer is not suitable. It is deeply concerning and disappointing to see that transfers are still being recommended at the levels we have seen.

“Deciding whether to transfer out of a DB scheme is one of the most complex financial decision a consumer may have to make and it is vital customers get high quality advice. Our ambition is for pension transfer advice to reach the same standard as that of the rest of the financial advice market.”


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There are 26 comments at the moment, we would love to hear your opinion too.

  1. I have serious doubts about these figures.

    I meet many clients and have an informal chat about the process, pros/cons and costs. It becomes apparent that they are unsuitable within the first ten minutes without all the formal advice process being implemented. Those clients are not even registered in the figures as a ‘not to transfer’ as it would be a giant waste of money for them to put them through the process. The generic conversation is not a recommendation but the process and costs are often off putting (and part of the advice gap imo).

    You do not need a complex process at the initial stages to identify an unsuitable course of action for someone who is either risk averse or has little in the way of financial means.

    • “Informal chats” like you describe is a triage service, and numbers should be recorded, both the number who do not go on take advice, and those who do. There is a very fine line between triage and advice, so such discussions should be evidenced on your files for your own protection.

      • Going into anorak mode, PS18/20 says at 3.15

        “We also said we consider it would be good practice for firms to keep records where
        they have provided triage. This may help in resolving any future complaints.”

        The key issue would be whether this was simply generic information or specific to the client.

        A statement of “I will assess this for a fee of £X but if I find a transfer is not suitable for you I will neither recommend nor arrange one” is not only a statement of fact but compliance with Principle 8.

        If the client says “I will not pay if I am not going to transfer” then, arguably, there is no potential for them to become a client (at least in this regard) and they thus would not be an eligible complainant.

    • Christopher Lee 19th June 2019 at 10:16 am

      I agree with Greg Heath. It is often apparent immediately that clients should not be considering a DB transfer, a lot of the time simply because they are carried away by the media coverage of pensions freedoms and haven’t considered all of the implications. The other point I would add to Greg’s comment is that where people still wish to consider a DB transfer I quote them a fixed fee for the analytical work and point out that I may end up recommending they stay put. To date I have not had one take up of the offer of this service. Those that simply give up on the idea, because they wish to avoid any cost, will not be included in the FCA figures, but my guess is that some will ring around until they find an adviser that will do it on a contingency basis.

    • Greg. Seriously, you need to revise your approach. Your comment ‘it becomes apparent that they are unsuitable within the first ten minutes’ indicates that you have formed this view based on the client’s circumstances and hence you saying it’s not worth going through the full advice process … this means you have given advice to stay. You may not agree but your view is irrelevant, the FCA have quite explicitly said that this is advice. See PS18/20 (https://www.fca.org.uk/publication/policy/ps18-20.pdf) sections 3.13 – 3.24

  2. Julian Stevens 19th June 2019 at 9:47 am

    Thank goodness I’m not in this market though, if I were, I wouldn’t go anywhere near such a transaction on an IC basis (in fact, I’m not prepared to transact anything on an IC basis).

    The position of the FOS has been clear for a number of years ~ if you facilitate it on any terms, YOU are responsible for the outcome. I’d be very surprised if any PI insurers are prepared to offer cover for IC DB transfers.

    Upon deciding that transferring wasn’t such a good idea after all, all the client has to do is lodge a complaint and the FOS (if it goes that far) is highly likely to disregard any waiver of liability and uphold it. Commercial suicide.

  3. Christopher Petrie 19th June 2019 at 9:52 am

    Unfortunately Greg, the new Triage requirements of the FCA make such a common sense approach difficult to comply with the rules.

    It’s almost impossible now not to give advice….ruling out a transfer at the early stage could be construed as advice just as much as arranging a transfer. With the same CMC risk in the future.

    Sadly, although I have permissions and authorization, I no longer wish to offer any DB advice, it’s just too much of a long term risk and cost to the business.

  4. So we have data going back 4 years ….. so in fact history
    It’s of very little comfort to my clients who actually pay the likes of Megan Butlers huge salary, and the FSCS levies that transpire from the FCA forever being behind the gain line, so comments like, “we at the FCA have repeatedly been clear of what is expected from financial advisers” well it’s quite obvious they are not ?
    If the FCA like history so much, perhaps they should start to learn from it !

  5. The triage situation is always a problem, I was presented with case yesterday that had no hope of success and she had paid another adviser for a report, only to be told he was not qualified to do transfers!

    What I did identify was a better way to meet the objectives without transferring the DB scheme, which avoided giving definitive advice and further costs to the client as it was money she already had but could be replenished when the DB scheme came into payment.

    As the FCA rules insist that alternatives should be considered, I would hope that this would protect against a future complaint, but who knows?

  6. Several of you are commenting that you have chats with clients about their DB but don’t advise them to transfer. You are almost certainly giving advice, or implied advice, to stay in the scheme (and from Oct 2018 this requires you to provide a suitability report for your stay recommendation).

    Have a look at PS18/20 (https://www.fca.org.uk/publication/policy/ps18-20.pdf) sections 3.13 – 3.24) and PERG chapter 8 if you want the detail.

    It is almost impossible not to be giving advice if you have a chat about a DB scheme and even harder to demonstrate that you haven’t given advice.

    I strongly suggest you
    a) either give full advice on a DB or don’t, no half-way house (there is no half way house)
    b) do triage ‘at a distance’ ie by using a written guide or video and not one-to-one with an adviser

    • A written guide makes a good deal of sense as it is clearly not aimed at the individual and is generic.

      If it includes the terms for carrying out an investigation (including fees if the recommendation is not to transfer) then those not interested or willing to pay will simply walk away.

    • I understand your point Rory but I keep well clear of advice or implied advice. Often clients read articles in the press and get carried away as all they see it a big number. When I talk to them I am mostly explaining what a DB scheme is, what is does and how it works.

      If the conversation moves a millimetre over that line then it is a fixed fee for advice or an opinion.

      I understand why the FCA might argue implied advice but if they sat in that room and listened they would quickly realise that most of those people are not financially educated at all and they need the basics explaining. Once I have finished talking to them I send them away to think about it. Most never come back. If they do we move into advice mode and fees are agreed.

      My point is these members of the public are not counted at all and I question the actual overall figures. I dont think they represent what is happening on the ground when it comes to financial planning and DB schemes.

      However this is an evolving area so the next few years with more information will be enlightening.

      • Very sensible, Greg. Not being in this market, I’ve not examined the rules, though the FCA’s ban on triage (a considered, professional opinion based on a few exploratory questions, avoiding the substantial cost of a full R&R, whatever the conclusion), seems to be an overly heavy-handed knee-jerk reaction.

      • Hi Greg. I can see how you are trying to do the right thing but you – and others – really need to be careful about the definition of advice. It is more nuanced than you think and I would suggest you speak with your compliance support people about this.

        • I tend to agree about nuance but if you replace nuance with ‘confusing’ then it’s closer to the truth.

          If it’s so ‘nuanced’ that so many advisers are still getting it wrong then that’s the fault of the rules or the regulator at this late stage isn’t it?

          Imagine if the Civil Aviation Authority acted this way. Some rules, some guidance and some acceptance of nuance without coming out and making things crystal clear in a very timely fashion…

  7. How smug of the FCA to conclude that transfers “are likely to be unsuitable in most cases”. How can it be “unsuitable” to desire to leave some of one’s pension fund to one’s children with the added benefit of it being free of IHT. The key factor is the degree of risk in clients achieving this most worthy aim.

    • So the client’s *objective* is to provide for the next generation? There are other ways of doing that which don’t involve taking on the irreversible investment risk of giving up a guaranteed income stream.

  8. As Rory says, any conversation which is specific to a DB scheme is advice as there is usually a conclusion either way at the end of the discussion.

    We were careful in the case I mentioned and only looked at the client objectives, before coming up with an alternative solution to a DB transfer.
    If you follow the FCA default starting position it is not advice in itself but generic.Some may say that repeating the FCA COBS rules is advice, there must be safe statements that we can make without liability.

    If that requires full chargeable DB transfer advice then the world has gone mad, or exists to perpetuate an army of regulators and compliance firms.

    I will be issuing a client information guide for all future enquiries, following the PFS Gold Standard, this should act as a triage and does make it clear that a fee would be payable if they wish to continue further, whatever the outcome.

  9. I tell you what is “unsuitable” and that’s the FCA rule book
    I blindingly obvious we are damned if we do and damned if we don’t …

    On the one hand we have the poor old client wanting a plain and simplistic answer, us with our hands tied, is it advice, triage, or guidance and having to support this with files, compliance, and suitability report.

    All this costs a huge amount in fees and time …so what happens, good Adviser’s avoid it like the plague, clients can’t afford it, which leaves the poor client open to scams and bad advice by smash and grab merchants DIYing or going for cheap

    The FCA is busy resting on their laurels slapping themselves on the back saying our rules are clear ……

    It’s about time the FCA got behind good advisers and advice firms, not forcing them to reduce permissions and activities through layering on more rules, process, costs and fear.

    For me …everything is advice from start to finish and I charge for it …..and as I say to my clients I don’t make the rules but I do have to pay for them which is passed on to you….now that is the biggest scam and miss-selling scandal this century……….
    Now what incentive is there really, for the FCA to do a good job ?
    Has anybody heard of one of them being sacked, or fined ? because by golly there have been some major mess ups over the years !

  10. If we close the doors and turn them away we are to blame for the advice gap.

    If we charge the appropriate fee for advice we have priced consumers out of the market, creating an advice gap.

    As DH points out, the gap is filled by crooks and wide boys, all going on under the nose of the FCA, the good guys keep getting the blame and footing the bill.

    • It certainly feels that way.

      Perhaps it’s time IFAs (and professional bodies) took the initiative and refused (or advised not) to provide advice on DB transfers until there were clear and definitive lines on what was acceptable and what wasn’t. How long before the Government were on the FCA’s case to set clear and unambiguous lines of defence for advisers rather than the ‘nuance’ cited by Rory?

      For those old enough to remember, history is repeating itself on DB transfers to such an extent it’s a carbon copy. Governement initiative driving people to seek transfers. IFAs providing the advice in a regualtory fog. Regulators biding their time while issuing a few comments and general guidance to cover themselves. Fan experiences some detritous flying its way. Regulator blames IFAs mentioning said comments and guidance (not our fault). Review and redress payments start. Rinse and repeat.

      Perhaps the only surprise is that PI insurers haven’t withdrawn from the market already. Then again, they may be taking the opportunity to fill their boots while they can and will retire from the arena as soon as a significant level of claims start coming in.

  11. Rebecca Aldridge 19th June 2019 at 5:08 pm

    The FCA quote is that it’s deeply concerning and disappointing to see that transfers are still being recommended at the levels they have seen. They clearly feel the proportion of transfer recommendations is too high. I’m interested to know what they think an acceptable the proportion should be?

    I can’t speak for other firms but I’ve found that the majority of clients that have approached me have already done lots of research of their own and, while they haven’t done the detailed analysis that an adviser would, they are already pretty well informed and are thinking on the right lines. I’ve also met with lots of clients who have told me they’ve looked into transferring and decided for themselves it’s not of any appeal so haven’t requested any advice. If this is true of a larger set of people, that suggests there should actually be quite a high proportion of people seeking advice for whom a transfer is appropriate – because they have already done their homework before even contacting an adviser.

    In fact, if that were true of a lot of people, isn’t it best that there is quite a high proportion of transfers being suitable, because it implies they had the resources and information available to understand their options and the pros/cons, being well-informed enough to decide for themselves whether to seek advice as a result?

    I feel the data is being taken at its headline level without perhaps going deeper into the other facts behind it.

  12. Rory, you speak about the FCA rules and guidelines as if they are good. They are not. They prevent people from having the opportunity to speak to expert advisers about the pros and cons to think about when looking at the possibility of transferring a DB pension. It prevents good honest advisers from in effect giving a pro bono education to people with DB schemes (at this stage they are NOT clients of the adviser in any real world definition of what advice really is). Your talk of the definition of advice being more nuanced is of course technically correct when applying the FCAs principles. But the principles they apply are appalling and do NOT protect the client. They simply eliminate the opportunity for advisers to provide help to people so that they can understand more about the pros and cons of transfers out of DB schemes. SO the advice gap grows. The FCA is full of good intentions but their approach is wrong, does not lead to better outcomes and screws people who try to help. I realise you are simply pointing out the facts as you see them, and that you are not wrong in your interpretation. What is wrong is that the FCA adopt the standpoint that they are right and that any alternative view is wrong. We live in a world where everyone is scared to disagree, and when people put their head above the parapet they are often metaphorically decapitated. Sad world.

  13. Julian Stevens 25th June 2019 at 2:41 pm

    I wonder how conversations between members of the public and someone at the MAPS might be construed to have been advisory.

    That aside, it seems that the FCA is intent on doing everything in its power to make the provision of advice on DB transfers, either way, as damnably difficult as it possibly can. Given that its own starting point is that for most people transferring such benefits is NOT likely to be suitable, why does it have such a problem with advisers confirming this general rule of thumb by way of a semi-formal conversation without needing to charge the client a hefty fee for what is nothing more than a considered professional opinion? Does this not fly in the face of what the FCA claims but has so far failed dismally to achieve with its pointless FAMR?

  14. Terry Mullender 25th June 2019 at 4:41 pm

    For the FCA to state that most people should remain within their DB scheme is simply wrong.

    Every client has unique personal and financal circumstances so how can the FCA form that blanket conclusion from the outset?

    After gathering ALL relevant personal and financial information from your client and their DB scheme administrator, issue your Suitability Report and recommend that they either remain within their DB scheme or transfer out.

    Finally refuse to transact business on an insistent client basis.

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