Advisers ‘remain concerned’ over DB transfer advice remedies

Advisers remain concerned that proposed regulatory changes from the Financial Conduct Authority (FCA) will reduce the supply of defined benefit transfer advice, according to Aegon.

Its Retirement Advice in the UK report found that 84 per cent of advisers felt that the regulator’s proposed ban on contingent advice would reduce savers’ access to advice.

This is an increase from the previous year, when 67 per cent of advisers said they thought it would lead to a reduction in advice access.

However, it also revealed that advisers believed that contingent charging presented problems, with only 16 per cent saying that they did not believe it would encourage some advisers to give unsuitable advice.

Commenting on the findings, Aegon pensions director, Steven Cameron, said: “The FCA’s drive to make advice in the DB transfer market of consistent high quality should be fully supported and many of the proposals in its latest consultation are welcome.

“However, no matter how well intentioned these interventions are, advisers remain concerned over some of the measures, particularly as they carry the risk of dramatically reducing the supply of advice.

“The market is divided on whether or not contingent charging should be allowed for advice on transferring from a DB scheme. But what is clear is the overwhelming majority of advisers feel a ban will reduce access to advice.

“The issue is that some individuals aren’t able to pay upfront for advice and without the option of contingent charging, won’t seek it. Advisers also need more detail on how the ‘carve-outs’ from the ban will work.”

The reaction to the proposed introduction of abridged advice was mixed, with 19 per cent disagreeing that would be effective for identifying clients that would not be suitable for a DB transfer, while 46 per cent said that it would be effective and 35 per cent were unsure.

Over a third (36 per cent) believed it would save time, while 38 per cent were unsure.

The FCA also proposed strengthening the requirement for advisers to consider a workplace scheme as a transfer destination for their client as it believes a default option within workplace schemes is suitable for many.

However, 71 per cent of respondents said that investing in a default fund is unlikely to represent the best advice, and nearly two thirds (64 per cent) said that it would reduce their ability or willingness to offer advice.

Cameron added: “The proposed introduction of ‘abridged advice’ receives a tentative welcome from advisers with the potential to allow advisers to cost-effectively ‘filter out’ DB members not suited to transferring. However, advisers remain hesitant that this new service with full fact find will save sufficient time and hence money to appeal to customers.

“Advisers also raise concerns over proposals which would tilt the balance towards using workplace schemes to receive DB transfers saying it could reduce their ability and willingness to offer transfer advice.

"Workplace schemes should be considered, particularly if they offer lower charges, but many are unable to accommodate adviser fees and investing in the default fund may not be suitable, particularly for large transfers or for those approaching retirement.”

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