The firm is calling for a ‘safe harbour’ where advisers can use their experience and judgment to give an initial view to clients, potentially saving them thousands of pounds in advice fees where there is a strong likelihood of a recommendation not to transfer.
In March 2018, the FCA published a consultation paper on ‘Improving the quality of pension transfer advice’. In it, they raised concerns that initial ‘triage’ processes whereby advises give an initial steer to clients about a transfer inquiry could cross the boundary into regulated advice. The FCA is encouraging advisers to make sure that any initial response is purely ‘generic’ and educational and not specific to the client’s individual circumstances.
In response, Royal London undertook a survey of advisers in June 2018 which asked advisers active in the DB to DC transfer market a series of questions about how they ‘triage’ clients who inquire about pension transfers. Questions included:
Do you operate an initial ‘triage’ service for people inquiring about DB to DC transfers?
If YES, can you briefly describe the process
What percentage of those approaching you about transfers:
Are ‘triaged’ at an early stage and do not take matters further
Go on to take advice and are recommended not to transfer
Go on to take advice and are recommended to transfer?
Will the FCA’s proposals on triage improve member outcomes?
The responses indicated a huge variation in how firms approach the idea of triaging clients. Key results were:
More than two thirds of advice firms operate an initial ‘triage’ process when approached about a potential transfer. But what this means in practice varies hugely. When asked ‘what percentage of clients are triaged and do not then take things further’, replies ranged from ‘NIL’ to ‘over 90%’.
In some cases, firms started from a strong presumption against transfers and actively sought to discourage clients. Comments included:
“We do a high level assessment to see if their requirements are ‘rational’”
“We do it over the phone to weed out ‘timewasters’”
“If they are cautious, it’s a definite no, and if ‘for wrong reasons’ definite no”
“They are thoroughly grilled as to their reasons”
Some firms undertook quite extensive and personalised analysis, all as part of what they saw as a ‘triage’ process. Examples included:
‘We undertake TVAS and spreadsheets to look at Critical Yield’
‘Full interview’
‘Full examination of client’s finances, attitude to risk, reasons for transfer etc.’
‘Questionnaire, cash flow modelling’;
At the other end of the scale, other firms were very careful to do nothing that could be construed as personalised advice:
‘we have an informal chat about generic pros and cons’
It’s a discussion on general issues then we send the Royal London ‘five good reasons’ guide
‘a quick educational conversation’
In terms of the FCA’s proposal that advisers should be much more careful about crossing the line into advice when undertaking triage, advisers were split as to whether this would be a good idea. Although a majority supported the proposal, around 1 in 3 advisers thought that consumers could lose out if rules around triage were tightened up.
Commenting on the survey and on the FCA’s plans, Royal London policy director Steve Webb said:
“Our survey revealed a huge variation in adviser practice, with some advisers having a very general initial conversation with clients and others doing extensive personalised analysis, whilst still seeing this as part of a triage process. So it is understandable that the FCA is looking to provide greater clarity and standardisation in this area.
“But there is a risk if the FCA clampdown makes advisers afraid to offer an initial triage process. For some clients it is clearly not going to be in their interests to spend a large amount of money only to be told that transferring is not a good idea. The FCA needs to provide a ‘safe harbour’ for advisers which would allow them to have such a conversation with a client at an early stage, without putting themselves at regulatory or legal risk”.
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