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Profile: Ian Wilkinson on the perils of pension transfer advice

Rutherford Wilkinson’s boss on why he decided to stop doing DB transfers, and why he feels he’s been vindicated

A year after chartered financial planner Rutherford Wilkinson stopped advising on defined benefit transfers, managing director Ian Wilkinson is convinced it was the right thing to do.

He says: “We took the decision to withdraw from this area of advice for no other reason than we felt it would remove an element of risk from our business that we didn’t feel was necessary to have. Based on the noises from the FCA I believe it could be the next misselling scandal, as the client is giving up a guaranteed income in return for flexibility and death benefits.”

Wilkinson points out that record low bond yields have led to the high cash equivalent transfer values currently on offer. “I have seen some CETVs that exceed 38 times the deferred pension. They are bound to look attractive to members. However, it is essential that the advice isn’t viewed in isolation – based on a critical yield or multiple of pension – and that it dovetails with the client’s aims and objectives.”

So what does Rutherford Wilkinson do with clients who want advice on pension transfers?

“We have established relationships with third-party advisers who are happy to work in the space.”

“Based on the noises from the FCA I believe it could be the next misselling scandal…”

Finding the right balance

He adds he was heartened by an FCA alert issued in January, Advising on Pension Transfers – Our Expectations, which endorsed a collaborative approach between a client’s existing adviser and the firm appointed to provide the DB transfer advice.

“We engage the client and make it clear the advice will be provided from two advisers working in a collaborative way. The third-party adviser will deal with the complexities of the DB transfer and ensure they meet with the client’s overall financial objectives and we will build a bespoke plan covering the client’s aims and objectives, including income and expenditure requirements.

“We confirm the extent of the overall fee charged to provide this advice and we don’t receive a revenue share from the third-party adviser. Once the transfer is invested, the policy is transferred to our agency and we raise our fee note, which is settled directly from the policy.”

Wilkinson does not believe there is a shortage of appropriately qualified advisers in the DB transfer market. He thinks the reason why more advisers are not active in the market is the stance taken by firms’ risk and compliance departments and the PI insurers’ approach to historic and ongoing advice, which leads to high PI costs or difficulties renewing cover.

“Even the specialists are coming under pressure with their PI cover.”

Despite its reliance on third-party specialists in that particular area of advice, Rutherford Wilkinson is built as a team of specialists in everything else.

“All our advisers are whole of market with the appropriate qualifications to provide such advice and can therefore deal with all client types if they want to. However, we believe the world of financial services is too complicated for a general practitioner IFA, and wouldn’t expect them to have an indepth knowledge of very complex cases. Therefore, I encourage them to introduce clients to one of our specialists in that area, which allows them to maintain the relationship with the client.”

Wilkinson specialises in corporate advice and pensions as a natural consequence of joining the family business, which focused on the corporate and high-net-worth markets, in his late teens. It made even more sense when that firm, Wilkinson Hatton, merged with Rutherford Financial Management in 2002.

“The key driver for the merger was to create a business with sufficient critical mass to enable us to specialise in specific areas of advice. At the time, the directors felt the business was becoming so complex that a general practitioner IFA would not be able to cope with the challenges ahead.

“At the time, the corporate market was not that lucrative and none of the other directors wanted to head that particular department. As I am always up for a challenge, I decided to head it up and pass on around 90 per cent of my private clients to other directors and advisers within the business.”

From small to sale

Rutherford Wilkinson also specialises in advice for medical professionals as a result of recruiting two self-employed consultants, Graeme Urwin and Ray Prince, in 2007.

“They specialised in providing advice to both doctors and dentists. At that point their business, which trades as Dental Medical Financial Planners, became an extension of our business and we utilised their expertise throughout Rutherford Wilkinson in general.”

As well as helping Urwin and Prince build their business, it enabled Rutherford Wilkinson’s advisers to win clients knowing they could refer them to advisers with expertise in this market.

In 2008, Rutherford Wilkinson’s shareholders decided to sell to consolidator Perspective Financial Group. As a result, Wilkinson now sits on the operations board and the main board as the firm’s group practice director. “I provide the main board with the views of a practising IFA and ensure we share best practice throughout all our offices, which also includes high level discussions with product providers.”

Wilkinson sees Rutherford Wilkinson as completely different to the small IFA firm founded by his late father Mitch Wilkinson. “When my father set up Wilkinson Hatton in 1985, his main aim and objective was to provide advice to SMEs and high net worth individuals on a fee-paying basis and build a family business. He had no desire to employ other advisers, mainly because he could not find the right calibre.

“Rutherford Wilkinson is a completely different animal to the business he started. While we have retained our key goal of providing high quality advice to all clients – both high net worth and other – the firm is considerably bigger.

“Running a business of this size comes with completely different challenges to running a small boutique IFA.”

Five questions

What is the best bit of advice you’ve received in your career? 

Don’t trust product providers and challenge everything until you are satisfied with the outcome.

What keeps you awake at night? 

Not much these days.

What has had the most significant impact on financial advice in the last year? 

The Government’s inability to decide its long-term strategy for retirement funding.

If I was in charge of the FCA for a day I would…? 

Secure a fairer deal for advisory firms on FSCS levies and prevent the sale of unregulated collective investment schemes to unintended recipients.

Any advice for new advisers?

The majority of advisers can look after existing clients. However, there aren’t many advisers who can win new work and maintain relationships with clients. To make yourself stand out, you need to be doing both.

CV

2002-present: Managing director and pensions director, Rutherford Wilkinson

1989-2002: Various roles at Wilkinson Hatton, from administrator to partner

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