DB transfers: what you need to know about the Finalised Guidance
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Over the past few years, we’ve seen first-hand how much Pension Transfer advice has materially improved. Ultimately, this is good news for clients, good news for you and good news for the wider advice profession.
And the FCA’s thematic work backs this up too. Their latest thematic work found 60% of files reviewed, for advice given in 2018, to be suitable. However, that’s not to say there’s still not more work to be done — the regulator made it clear it wants to see further improvements in this sector.
That’s why last week’s paper from the FCA is essential reading for all firms involved in providing Pension Transfer advice. It’s full of useful guidance to help you consistently provide suitable advice to clients.
What does the guidance cover?
The Policy Statements released by the FCA in 2018 and 2020 helped advisers better understand the levels of analysis required when undertaking Pension Transfer advice. For example, the introduction of the Appropriate Pension Transfer Analysis has helped many firms demonstrate the suitability of the advice they are providing.
The Final Guidance builds on these Policy Statements and should enhance the standards of advice across the sector, leading to better client outcomes. The guidance covers many areas relevant to Pension Transfer advice including:
- Systems and Controls
- Professional Indemnity Insurance
- Training and Competence
- Triage services
- The advice process
The advice section gives details around the information that should be collected on client’s personal and financial situation, such as any other assets the client may hold and their attitude to risk (including their attitude to pension transfer risk). This gives loads of helpful insight into the level of detail that should be collected — which might be more than you think.
The guidance confirms FCA rules and references the FCA Handbook often, ultimately making it clear for firms that you’ll need processes in place to help you collect as much information as possible and use it in the most appropriate way. The rules and guidance are brought to life by giving examples of good and poor practice, helpfully illustrating exactly what the FCA expects in relation to Pension Transfer advice.
One of the key sections is on the advice, which reiterated the FCA view that, for most clients, keeping their safeguarded benefits will be in their best interests. A personal recommendation to transfer should only come after obtaining sufficient Know Your Customer information, enabling you to clearly evidence that a transfer would be the most suitable option for that particular client.
If you haven’t read the Finalised Guidance in detail, we’d recommend you do so. Then, undertake a gap analysis to understand the difference between the guidance and your firm’s policies and procedure. Of course, where weaknesses are identified these should be addressed pronto.
By doing this analysis, and taking action where necessary, we will continue to see the improved levels of advice in this important sector – a win-win situation for all.
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