The chief executive of Prudential’s advice arm has expressed concerns that the size of some defined benefit transfer requests could create mis-selling problems in the industry.
Prudential Financial Planning began advising on DB transfers seven months ago. But PFP chief executive Chris Haines says he has put appropriate safeguards in place to ensure the company does not offer poor advice on DB transfers itself.
The reassurance comes as advisers have expressed concerns that providers’ in-house DB advice offerings may suffer from conflicts of interest.
Talking to Money Marketing, he says: “Potentially there are huge risks to the industry if we get this wrong.
“But I don’t think you can now operate in the retirement space unless you can offer advice in this area, and satisfy the small minority of customers for whom it is in their best interest to transfer out of a defined benefit pension scheme.”
PFP has recruited five registered pension transfer specialists, who will review all DB transfer requests at the firm. They will rule on the suitability of these transfers, rather than individual advisers. The pension transfer specialists will only assess files from the advisers and not give advice to wider Pru clients themselves.
Haines says given the size of some of these transfers this centralised control ensures there is “no temptation” for advisers to recommend transfers that may not be in the client’s best interests.
Haines also confirms that the firm will not facilitate transfers for “insistent clients”.
He says: “If the pension transfer specialist decides that a transfer is not appropriate then we will not take this transaction further.”
He adds the industry needs to have a firm approach when dealing with insistent clients, as there is the potential for this to create significant problems in future.
PFP has been expanding its team of restricted advisers over the last few years. It has just upped its target again and is currently looking to recruit a further 50 advisers over the next six months.
This recent expansion means the company is now one of the 10 biggest advice businesses in the UK. However, Haines says there are no plans at present to increase the number of pension transfer specialists PFP employs.
He says DB transfers remain a small part of the business, but with pension freedoms it was important to offer this as part of a wider financial planning proposition.
His comments come as new research shows that almost three quarters of advisers expect greater demand for advice on pension transfers over the next 12 months – with half saying this will be a key area of growth over the next two years.
However, the research by Aegon shows that many are concerned that there is insufficient clarity from the regulator as to what constituted best practice on transfer advice.
More than a third of advisers said regulatory guidance on DB transfers was “unclear”, with 70 per cent saying it was “too cautious”.