The FCA’s long awaited DB transfer review was published today with, seemingly, a ban on contingent charging which turns out to be not a complete ban after all.
There are already ‘carve out’ exceptions for those on low incomes and life shortening medical conditions who may not be able to afford regular financial advice fees. In addition, the FCA has also called for lower cost ‘abridged’ advice on transfers to be offered, perhaps a route to cheaper transfer advice.
The issue has split the industry. Many have said the FCA’s ban on most contingent charging advice will undermine the sector just as many will have to consider transfers to produce the pension income they need post the pandemic.
They have a point. It seems more than likely that many thousands of people will lose their jobs this year, many close to retirement. Some will want to take their pension now rather than defer it and for some a transfer could be a distinct possibility to make this happen but where can they go for advice?
Many good Financial Planners have turned their back on giving pension transfer advice in recent years and that’s no surprise. After years of stick-waving by the FCA some have concluded it’s not worth the candle.
That’s a shame because pension transfers can be a key part of complex Financial Planning scenario and the right thing to do in the right circumstances for many clients.
In Financial Planning Today’s popular Planner Casebook section many of the cases involve a pension transfer and overwhelmingly this was the right thing to do for the right client, as our highly experienced contributors explain in painstaking detail. Indeed in many cases it was difficult to see how a Financial Planning ‘conundrum’ could be solved without a pension transfer.
I’ve generally been against a ban as removing an option from people without the money to afford Financial Planning but the profession will need to live with it and indeed some planners still in the market may prosper. The demand for their services is set to increase as fee-paying advice on pension transfers becomes the primary option.
The FCA has come in for flak but ultimately it had to decide on a ban or no ban and has clearly made a choice.
A ban, though, is a smokescreen for what the FCA has really been doing which is ‘re-shaping’ and reforming the DB transfer advice market to drive up standards, in the longer term a more important aspect of the reforms.
According to the FCA report today the quality of pension transfer advice is improving and that has to be a positive and down largely to pressure from the FCA, the media and industry bodies such as the PFS with its Gold Standard campaign.
The greedy and incompetent have enjoyed a meal ticket with pension transfers; it’s time for the professional and highly qualified to take up the challenge now.
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Kevin O’Donnell is editor of Financial Planning Today and a financial journalist with 30 years experience. This topical comment on the Financial Planning news appears most weeks.
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