On 19 June 2019, the FCA provided an update analysing advice on defined benefit pension transfers since pension freedoms began in 2015.
Rather than assessing the quality of advice given, the update focuses on the number of scheme members who’ve received advice and the proportion of those recommended to transfer.
Between April 2015 and September 2018:
Megan Butler, Executive Director of Supervision, Wholesale and Specialists at the FCA said:
We have said repeatedly that, when advising on DB transfers, advisers should start from the position that a transfer is not suitable. It is deeply concerning and disappointing to see that transfers are still being recommended at the levels we have seen.
Of course, high level numbers like these can miss some of the detail. For example 1,346 firms reported data on the total number of clients who hadn’t proceeded past the firm’s initial guidance (known as triage). The total number of clients reported as not proceeding to advice was 59,086. When these triaged clients are factored in, 55% of clients were recommended to transfer.
While it’s unlikely the FCA has a specific figure in mind as an acceptable conversion of enquiry to transfer, reiteration of the starting position of transfers being unsuitable for most people implies it’s somewhere south of 50%.
Before we criticise the whole industry, or even just the 2,426 firms advising in this market, let’s bear a few crucial points in mind:
The update tells us 2019 and 2020 hold the promise of further analysis of the data and more detail on the suitability of advice given. From the data already collected, the FCA has identified firms where it believes the risk of poor practice is highest, leading to further investigation and firm visits.
As an industry, we should welcome this increased effort to root out those firms falling short of the advice standard expected in this market. The sooner this happens, the better - for both customers and the vast majority of advisers trying to do the right thing and enhance the reputation of financial advice.
Senior Business Development Manager
Justin Corliss is a Senior Business Development Manager with Royal London. Justin’s career in financial services began in his native Australia in 1997, where he worked for the Commonwealth Bank of Australia in client facing mortgage roles. Since moving to Scotland in 2002 he has held positions as a broker consultant for both Scottish Widows and Scottish Life dealing predominately with pensions. Before assuming his current role he worked as an Employee Benefits Consultant with a private firm. Justin holds the Chartered Institute of Insurance Advanced Diploma in Financial Services including AF3 & AF7.