DB TRANSFERS

The IFA world continues to be divided on DB transfers.  Most are now referring onto the “brave” few who continue to accept introductions.  We say brave, because the PI industry is the tail that is wagging the dog, imposing added requirements and volume limits on practitioners. 

There are specialist DB Advisory firms in the market such as Pensionworks or Pensionhelp, and we also have a specialist firm working with IFAC,  Purely Pensions.  There is no harm in outsourcing DB advice but you should ensure you undertake the relevant due diligence on any firm that you outsource to and can justify reasons they have been selected.

You can potentially receive a referral fee for outsourcing but bear in mind that you need to be able to justify why there is a charge for you to refer this on.  Some firms will have the “referral fee” as an additional charge and will identify it as such.

There are two ways in which you can consider the advice to be undertaken with these firms – one adviser or two adviser basis.  

On a two-adviser basis, the introducing firm provides the DB Transfer Advice firm with all the required information on the intended product and investment solution, allowing them to use this within the advice process on the suitability of the Pension Transfer.  Once this has been completed by the DB Transfer Advice firm, the introducing firm would then follow up with a recommendation on the suitability of the product and the investment solution as it would be the introducing firm taking the responsibility for this element and its suitability.  Don’t forget to provide confirmation to the DB Transfer Advice firm that a workplace solution has been considered and discounted, as you will need to have obtained the information on a client’s Workplace Solution where applicable as a potentially suitable investment!  The new provider and investment solution would need to be suitable on more than simply cost; such as meeting their risk tolerance, aims and objectives.

This is in comparison to a one-adviser basis where the DB Transfer Advice firm will advise on the full pension transfer including the product and investment choice.  It is important to note that the DB Transfer Advice firm would not want the product and investment choice to change within the short term (though they can take no responsibility if it does.)  This change will not have been taken into account in their decision-making process on the suitability of the transfer and is frowned upon by the FCA, quite rightly.  Your ongoing fees will be taken into account here as part of the analysis regardless of solution as this will have been agreed with the client.

kirsty.turner@ifac.eu