International advisers failing to partner with UK firms for pension transfers

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International advisers are struggling to keep up with new pension transfer regulations, citing high fees and a reluctance from UK advisers to form partnerships.

Since April all defined benefit transfers must be overseen by a pension transfer specialist, meaning advisers working overseas must link up with UK advisers holding the correct qualifications.

However, more than half (56 per cent) of 289 international advisers surveyed by Old Mutual Wealth said they were facing challenges in establishing partnerships.

Speaking at Money Marketing’s Brave New World event last week, FCA head of pension policy Maggie Craig said: “The two biggest areas we have had comment on with regards to pension transfers are safeguarded rights and people who are overseas and trying to transfer and then need to get a UK adviser.”

Almost a fifth of international advisers said the biggest problem was the fees a UK adviser would want to charge their client, while 16 per cent said not knowing any UK advisers was blocking progress.

In addition, 15 per cent said concerns over whether the overseas or UK adviser would be liable had stopped them setting up an arrangement, while 12 per cent found UK advisers reluctant to take the business on.

Old Mutual Wealth pensions specialist Jon Greer says: “International advisers need to recognise defined benefit scheme designs are no longer as simple as they were in the past.”

Intelligent Pensions technical director David Trenner says: “We’ve had international advisers get in touch and in principle we don’t have a problem. But we say if we’ll do it, it has to be on both stages on the suitability of the transfer and the transfer itself.

“It also worries me that some less professional overseas advisers seem to be the first to complain about fees but are happy to take undisclosed commission.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Unfortunately, outside of the UK, the QROPS adverts claim to offer free financial advice. I queried this on an offshore adviser webpage this weekend and the response was “All advise and reports are free and without commitment.” ( Note spelling of advice )

    How can these offshore sales outfits then tell the client there is a fee to pay? What does this tell you about how they value their own advice? What vicarious damage does the offer of free advice do to the IFA profession as a whole, leading clients to think advice has no value?

    A UK IFA nowadays will undoubtably undertake a proper transfer analysis. This may be based on some assumptions that may turn out to be way off the mark, if the ultimate investments end up in more expensive offshore products than that agreed at point of transfer recommendation. A point, I guess, that David Trenner is alluding to with his comments.

  2. Geoffrey Hartnell 3rd December 2015 at 12:01 pm

    The last point in the article is the most poignant.If a UK based adviser undertakes the work, they also have to undertake responsibility for the advice,not abrogate it to the overseas adviser.
    The under the table non disclosed kickbacks from the fund managers means that portfolios are over concentrated, often in esoteric and highly risky funds.
    As the upfront charges are disproportionate to the ongoing adviser charge that most UK based advisers charge, there is little incentive in offering a long term regular review service proposition,which ultimately tarnishes the industry.
    Advisers need to understand that they have to pass over the investment management process to those better equipped to monitor portfolios on an ongoing basis, and concentrate on holistic financial planning.
    It’s the clients’ job to create the wealth,our role is to ensure that the correct tax advice and structure are maintained so that the investment manager can preserve it.

  3. I echo the eminent comments above. Its a sad, sad world out there for the unsuspecting British Expat, but its also a sad indictment of British financial literacy in general and in pensions literacy specifically. I for one am worried that international pressure forces a rethink by DWP and FCA that waters down the current regulations for international markets, helping the large numbers of unscrupulous advisers, who see pension money merely as FUM to rape and pillage in their scramble to earn as much as possible, as quickly as possible, before scarpering off, never to be seen again. The number of suitably qualified advisers working in the international marketplace is woefully low. This inevitably results in the mass destruction of individual’s retirement funds. Only today I have been approached by an adviser who has taken on a new client. Poor lady had £139,000 to start with, her original adviser used an offshore bond wrapper that 4 years later has a £5900 transfer penalty (but there isn’t anything to transfer). The remaining 3 investments in her fund (which represented over 40% of the initial investment) are LMIM and 2 Life settlement type arrangements, all toxic all enabling the adviser to earn more upfront.
    What perhaps is also a very damning indictment of the international space is the trustees of the QROPS allowed it to happen..Surely the trustees should be there to ensure the scheme is run correctly and that investor’s reasonable expectations are met would it be Ok to place 40% of someone’s fund into what might be described as esoteric solutions. It will be hard for the lady’s new adviser to tell her to put her retirement spending on hold for another 3 to 10 years because there is nothing liquid to meet her ongoing pension income needs
    I work for a QROPS scheme, we don’t allow adviser self management, for the reason above, (international advisers with relevant investment management professional qualifications working in countries with a large expat market are not quite equivalent to finding hen’s teeth but getting close..) advisers please don’t harp on about I have been investing for x years.. you may have been investing inappropriately for x years look at the scenario above (if I had started extracting teeth with a pair of pliers 10 years ago does that make me a dentist by experience?)…As for adviser remuneration, we insist on it being signed off by the client, its capped and the amount paid is reported in £ and pence in a completion statement issued directly to the member. Our scheme offer documents spell out the level of commission the adviser will earn from using a bond wrapper (and the commission is capped at the bond level) with no further upfront commission from the underlying funds.
    So please Mr Regulator tighten up the rules, don’t lessen them, whilst the pension plan member might not be living in the UK at this time, this is UK tax relieved money under scrutiny (tax payers funds if you will) and if the funds are then decimated in ridiculous adviser remuneration and inappropriate investment management the very real risk is that reasonably affluent ex pats will be forced to return to the UK and fall upon the welfare state, simply because their pension fund is no more.
    Our kids have already been sold down the river to repay the debt this generation built-up and will be left for them to repay, don’t let the burden be increased through a lack of backbone to at least try and eradicate malpractice which, if left unchecked, may result in added welfare costs.

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