Defined Benefit Transfer Costs

HappyHarry

freddymoney wrote: »

It annoys me because I am being quoted what I consider to be an excessive amount for what I perceive to be a paper shuffling exercise, they all claim a transfer is an excessive amount of paperwork but all of them refuse to break it down into days/hours. Some even claim it is mandated by the FCA, I spoke with the FCA and they signposted me to the terms of engagement for pensione transfers. FCA's are only required to give financial advice it does not mandate they that have to manage the transfer.

Managing the transfer itself is minimal work. Just making sure the client signs the forms in the correct place, and sending the forms onto the new pension provider. There might be the occasional phone call to the old and new pension providers to make sure everything is on track. Maybe even a call to the client to keep them updated. Minimal work really.

The work, and the cost, is in providing advice in the first place. I can’t just advise a client to transfer away from a DB scheme. I have to advise where the funds are transferred to, and what specific investments they go into. If I’m to do that anyway, why wouldn’t I hsndle the transfer to make sure all goes smoothly?

The implication of your posts is that you intend to manage the investments yourself from day one, which is why you want to manage the transfer itself. It will be very difficult to find anyone to advise you on this basis, unless you can clearly demonstrate that you have the skills and experience to manage your pension. This is because the guidance from the regulator is very clear in this area, in that the adviser must demonstrate that the ultimate destination of the transferred funds are appropriate for the client. With a client choosing their own investments, this would be quite difficult.

There was a comment earlier on in the thread suggesting there might be advisers out there willing to give advice on your £300,000 transfer for £1,500. That fee is far, far too low for such an amount and such high risk business. Anyone offering to give quality advice on this for £1,500 is not going to be able to afford to be in business for very long.

Aegis

freddymoney wrote: »

It annoys me because I am being quoted what I consider to be an excessive amount for what I perceive to be a paper shuffling exercise, they all claim a transfer is an excessive amount of paperwork but all of them refuse to break it down into days/hours. Some even claim it is mandated by the FCA, I spoke with the FCA and they signposted me to the terms of engagement for pensione transfers. FCA's are only required to give financial advice it does not mandate they that have to manage the transfer.

The trouble is that what you consider an excessive amount is deemed necessary by those of us who work in this area because of the layers and layers of regulations surrounding pension transfers. It's not always complicated to look at someone's circumstances and come to a conclusion as to what they ought to do, but more of the time it's a minefield of potential problems that can only come to light with fairly significant investigation into the scheme.

You may be able to negotiate a fee that works for you, but speaking for myself, I won't cut corners on the advice, which means the costs need to be high to justify the time and complexity of the work.

Sorry if it comes across as harsh, but if we get it wrong we could be on the line for a six-figure sum plus interest. As such, we need to spend time getting it as close to perfect as possible and to take a fee that justifies the risk of complaints if markets end up crashing badly.

freddymoney

You mention "if you get it wrong", can you describe what the definition of wrong is?

You can't make any guarantees to the investor so "perfect" and "getting it wrong" is a meaningless statement. Isn't success subjective anyway, how do you measure success and failure it? What you are saying is the more you pay me the fewer risk there are of me getting it wrong, just does not stack up to me

dunstonh

It annoys me because I am being quoted what I consider to be an excessive amount for what I perceive to be a paper shuffling exercise, they all claim a transfer is an excessive amount of paperwork but all of them refuse to break it down into days/hours. Some even claim it is mandated by the FCA, I spoke with the FCA and they signposted me to the terms of engagement for pensione transfers. FCA's are only required to give financial advice it does not mandate they that have to manage the transfer.

Your perception is not reality though. So, you cannot rely on your perception.

FCA = Financial conduct authority. Not advisers.

The general position of the FCA is that pension transfers are missold unless proven otherwise. Firms that carry out defined benefit transfers will be paying higher PI insurance forever more. So, long after your transaction has completed, the adviser firm is paying the costs.

Last time that people thought it was a no-brainer to transfer, turned out not to be the case with hindsight. Cue lots of missale complaints.

FCA's are only required to give financial advice it does not mandate they that have to manage the transf

DIY transfers are actually higher risk to an adviser. There are also VAT issues. Intention to buy allows the advice charge to be free of VAT. No intention to purchase via the intermediary makes the advice Vatable. Advice is actually VATable but it is the intermediation that makes it non-vatable.

freddymoney

Yes, I do want to manage my own investments and that would be 100% on deposit at a fixed interest rate as in my view that is 99.9% risk free. Unless you have a chrystal ball or some other method of forecasting the future everything else has risk attached to it and as we know the value of investmenst can go up and down. isn't that you get out of jail card ?

dunstonh

that would be 100% on deposit at a fixed interest rate as in my view that is 99.9% risk free.

Except it is not risk free at all.

everything else has risk attached to it and as we know the value of investmenst can go up and down

Cash has risks to it. Indeed, it can actually have higher risks than investments depending on the timescale. You need to consider all risks. Not just select one and ignore the rest.

isn't that you get out of jail card ?

No. The advice is to stop people who dont know what they are doing from making a mistake.

Aegis

freddymoney wrote: »

You mention "if you get it wrong", can you describe what the definition of wrong is?

You can't make any guarantees to the investor so "perfect" and "getting it wrong" is a meaningless statement. Isn't success subjective anyway, how do you measure success and failure it? What you are saying is the more you pay me the fewer risk there are of me getting it wrong, just does not stack up to me

It could be a simple as making the transfer to an execution only platform for a client who wants to manage his own pension funds without first sense-checking the portfolio they plan to use enough. That can be retrospectively deemed to be "wrong" if that client later complains to the Ombudsman.

freddymoney

You have confirmed the point I am trying to make, if the investor is adamant that he wants to manage his own fund this is a high-risk approach and an appropriate level of due diligence by the IFA is needed for which there will be a fee, I would not disagree with that. However, it is my contention that IFA's are doing this work (research) frequently and therefore they accumulate knowledge about the potential funds for the investor and therefore the workload should be less and so should the fees. I spoke to one IFA who has already recommended a fund and they are already familiar with my circumstances as they did a review 2 years ago. They still want to charge me £4000.00 to do the transfer paperwork. J

Aegis

freddymoney wrote: »

You have confirmed the point I am trying to make, if the investor is adamant that he wants to manage his own fund this is a high-risk approach and an appropriate level of due diligence by the IFA is needed for which there will be a fee, I would not disagree with that. However, it is my contention that IFA's are doing this work (research) frequently and therefore they accumulate knowledge about the potential funds for the investor and therefore the workload should be less and so should the fees. I spoke to one IFA who has already recommended a fund and they are already familiar with my circumstances as they did a review 2 years ago. They still want to charge me £4000.00 to do the transfer paperwork. J

It's not just the paperwork though. The scheme needs to be analysed to see what benefits it offers, how well funded it is, whether any parts of the scheme are subject to statutory protections, etc. After that, the advice to transfer or stay in place must be put together based on your objectives, with other options for achieving the same benefits considered and only dismissed with good reason (for example, if death benefits are the main reason to transfer, can those benefits be replicated using insurance whilst keeping the guaranteed income?)

It's never just a case of filling in the transfer paperwork.

freddymoney

1, scheme needs to be analyzed
2, to see what benefits it offers,
3, how well funded it is, whether any parts of the scheme are subject to statutory protections

Exactly my point, how many times do you do this for the same fund, if you have done it once you don't need to do it again for every investor.