One of the many issues on which the FCA has recently consulted is how advisers ‘triage’ clients who approach them about a potential DB to DC pension transfer. Earlier this year, the FCA expressed concern that in too many cases ‘triage’ was straying into advice but without the full processes that would normally surround full-blown advice. While a further statement from the FCA is expected shortly, they’ve made it clear that triage must be ‘generic’ and not relate to the specific situation of the individual client.
In order to shed some light on this issue, we included some questions in our adviser survey earlier this year about what different advisers are doing in this space. We’d like to thank all those who took the time to give us their thoughts.
What did you tell us?
Of nearly 400 advisers involved in transfer work who replied to our survey, roughly two thirds said they had some form of ‘triage’ process. But what they meant by this clearly differed hugely. For some, it was very much in line with the FCA’s rules, for example asking a client to watch a video or supplying them with our ‘five good reasons to transfer, five good reasons not to’ guide. But for others, the triage process included cash flow calculations, a transfer value analysis report and many of the features that would normally characterise full-blown advice.
Evidence of the difference between advisers also came when we asked what proportion of people were filtered out by this initial triage process. Answers ranged from ‘zero’ to ‘nearly 100%’. Those who answered ‘zero’ were advisers who didn’t see triage as being about putting people off but simply helping them to understand the process which would follow. The latter were advisers who were generally of the view that transfers are a bad idea and who actively sought to discourage people even from taking advice about a transfer.
It could be argued that such variation in practice suggests that the FCA is right to be concerned, and that there’s a case for greater standardisation in the client experience.
But there’s a danger in going too far down this route. It must surely be in the best interests of a client who’s interested in a transfer to be told at an early stage if the odds of them being recommended to transfer are very slim. Rather than pay thousands of pounds to be told to do nothing, surely advisers should be able to use their skills and experience to indicate to a client that it’s probably not worth their while going down this route, to help them decide what to do.
A safe harbour for triage
To facilitate this, I’d like to see the FCA create a ‘safe harbour’ around triage. This would allow an adviser to take an initial look at a client’s interest in transferring and give them an initial high-level response without being deemed to have given regulated advice. There could be some limited documentation to record the conversations, but nothing as time-consuming as around full advice. From the client’s point of view this would have the benefit of not spending large amounts of money only to be told that a transfer was a bad idea. And from the adviser’s point of view, they would be able to apply their judgment and steer the client in what they think is the right direction without the risk of subsequently being sued if it appeared that a transfer might have been recommended.
While the FCA’s desire for consistency is to be applauded, this should not be to the detriment of good client outcomes or common sense.