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Steve Webb: The trouble with triage and pension transfers

triage pension transfersThere is huge variation in what clients can expect when approaching advisers to talk about pension transfers. But is standardisation the answer?

When a client, or potential client, walks through the door holding a pension transfer value quotation, an adviser can be in a difficult position.

It is hard enough if they are a complete stranger but if they are someone with whom you already have an existing relationship, it can be a real challenge to overcome their desire to transfer when you do not believe it is in their best interests.

In principle, one way to avoid a client spending thousands of pounds only to be told it is a bad idea to transfer is some sort of triage process.

It ought to be possible for an adviser to share an initial view as to whether a full assessment of a potential transfer is worth undertaking. But there is a danger this could become much more difficult in light of an FCA review due to conclude this autumn.

Alan Hughes: Triage service will relieve DB transfer pressure

The regulator is concerned that some existing triage processes stray over the boundary into advice, yet without all the processes and documentation that would normally come with it. It is keen for any process to be entirely generic and not specific to the client’s individual circumstances.

Perhaps this approach makes sense if you are a regulator but surely a member of the public would be baffled to be told their adviser’s initial response could not be shaped by their personal situation.

Weeding-out rate

As part of a forthcoming paper with pension consultants Lane Clark & Peacock, we recently surveyed 400 advisers about various aspects of the pension transfer process, including triage. The results were rather startling. Around two thirds said they had some sort of triage process in place for when a client (potential or existing) approached them about a pension transfer. But what they meant by this varied enormously.

First, we asked what proportion of clients were “weeded out” by the initial triage process. The answers ranged from “virtually none” to “virtually all”.

Some took such a robust approach and were so convinced transfers were generally a bad idea that only the most determined clients with a powerful case even made it through to advice.

Others had such a light-touch introductory process that no client, no matter how unsuitable the transfer might prove to be, was weeded out at this stage.

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Second, we asked what the triage process included. Some advisers stuck very closely to the FCA’s latest reminder and said theirs was entirely non-specific, consisting only of an initial factual conversation and sharing perhaps a video or standard guide to the pros and cons of transfers. Others talked about spreadsheets, cash flow modelling and transfer analyses being included in theirs.

The findings suggest there is massive variation in what a client can expect when they walk through the door of an advice firm wanting a conversation about a transfer.

Avoid a clamp down

While some standardisation of process might be a good thing, I would be very concerned if the result in terms of regulation was a big clampdown on advisers having meaningful conversations with those interested in transferring.

It cannot be in a client’s best interest for this initial engagement to be so general that even manifestly unsuitable cases progress through to full advice.

Ros Altmann: My solution to the DB transfer advice debacle

This puts the adviser in a difficult position and is unlikely to leave the client very satisfied either.

What is needed is some sort of safe harbour, where an adviser can use their expertise to form an initial view of whether a transfer is likely to make sense.

In particular, they should be able to flag those cases where all the warning lights are flashing.

While every case is unique, surely an adviser should be able to say to a client that, in similar cases, they have consistently recommended against a transfer, and that while they would be willing to undertake a full advice process, it is highly unlikely to lead to a recommendation to transfer?

Regulatory purity and consistency has its advantages but I do hope any final recommendations from the FCA do not prevent such a process.

Steve Webb is director of policy at Royal London



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There are 8 comments at the moment, we would love to hear your opinion too.

  1. Hear here Steve – well said.

  2. The trouble with Steve Webb is that he has proved he is untrustworthy. In 2004 he was all for having the UK’s appalling frozen pension policy overturned;- ” for We are asking other countries taxpayers to support our pensioners”. Then late in 2008 he, with Liberal leader Nick Clegg signed a Parliamentary Early Day Motion calling for the overturn of the UK’s frozen pension policy. However, when he was Pension Minister his views changed totally and he denied the 4% of the UK’s pensioners a fair, equal, and non discriminatory pension; insisting instead because;- (1)the freezing of some pensions has been government policy for almost 70 years and (2) disingenuously stating that the UK government could not afford to index all its pensions, that the freezing of a few pensioners’, so UK’s State pensions policy will not be changed.!

  3. And if the client still wants to transfer, but the initial adviser does not want to process it, how about passing the research to another adviser of the clients choice with a view to reducing the fee, on the basis that they have less work to undertake

  4. Unforeseen consequences and the advisers are stuck between a rock and a hard place.

    DB Pension Trustees want adviser agreement these days, PI no longer offering instant client option, advisers unwilling to advise and consumers can only transfer if an adviser agrees. Talk about the mother of all messes.

    Advisers cannot win, what ever model they offer will be unsatisfactory to either the consumer, the regulator, the PI insurer or the MP’s. How can any adviser construct a process to confidentially help these consumers without putting their livelihood in jeopardy.

    Finally lurking in the background is the FOS. God only knows what documentation, what you would need to do to have any comfort or certainty of defending any future claim.

    This has frankly become a joke. It will never happen but the best solution would be for advisers to stand their ground and pull all advice until the FCA, FOS, PI and MP’s all agree something.

  5. There was a time when most advisers were comfortable telling clients that their Final Salary schemes were their financial security for life, and transferring out was usually not a good idea, particularly given the publicity regarding previous transfer and opt out scandals.

    We now have a scenario where clients want a win win situation, if they die too soon their heirs want compensation for not transferring, if they live too long they will sue if their money runs out. As Martin Evans has said, it is now unsafe to give advice to the people who most need it.

    Withdrawing all DB transfer advice unilaterally would force the issue, but no doubt someone will find a way to find us liable for not putting the noose around our own necks.

  6. We took the view some 4 years ago that we would not conduct any form of DB transfer advice, at least not until:

    1. The regulators understand how to regulate them
    2. The FOS understand how to adjudicate on them
    3. The PI Insurers understand how to underwrite them.
    4. The Politicians stop making political capital from them.

    Until that time comes, we are not interested. I am not risking my livelihood with those that know diddly squat about the subject, yet have the power to put us out of business.

  7. I agree with Steve Webb. The test that says “people like you generally get a yes/no or maybe” is a very useful thing to be told before advice is sort and given. If we are to ever get away from conditional charging – we need something like Webb’s approach to triage.

  8. I could not agree more with Steve’s view on triage. Personal circumstances are everything when it comes to DB transfers – health, marital status, total income in retirement. All of these factors have a massive effect on decisions. What is wrong with collecting more reasons to find out why a transfer will not be a good idea, so as to be able to give an even firmer “No”? Those who want to go further will always get full financial advice. What is needed is a cheaper way to say “No”.

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