Defined Benefit Transfer Costs

freddymoney

Interesting summary from the FCA

https://www.fca.org.uk/news/news-stories/our-work-defined-benefit-pension-transfers

My confidence in finding an honest IFA has significantly diminished, I am even more cautious now.

Oldskool90

freddymoney wrote: »

Interesting summary from the FCA

My confidence in finding an honest IFA has significantly diminished, I am even more cautious now.

That is a pretty damning report, and appears to blow out the water earlier claims on here that IFA's have a good reputation. It would appear that those in the best position to judge (FCA) aren't impressed.

IFA's appear to be misleading people into inferring that they must carry out the transfer, and it throws up a massive conflict of interest where the client agrees to handover management of their fund to the IFA in those circumstances, as presumably the recommendation in that case would be favourable for the transfer. The link you provide appears to support that presumption.

There is guidance on insistent client basis, but it's not even clear from guidance whether the process needs to reach that point. By this I mean that in my circumstances I would like to pay a flat fee for advice that recommends I take or leave my DB transfer value. I don't require an IFA to perform or assist in any transfer as i can take care of that myself. The relationship ends with the advice. How i choose to use that advice is down to me. IFA's would have you believe that they are liable for my decision, but evidence provided here earlier was not consistent with this position.

It appears the FCA / government need to look very closely at this position as this requirement to seek advice has simply presented an opportunity for IFA's to make a lot of money. Sadly it won;t help me or others in this situation, who are left searching for a reasonable IFA who is prepared to play by current guidance and charge a reasonable fee for some ground work to satisfy for some what is a formality

dunstonh

The report isnt that damning when you realise that virtually all the unclear were converted to suitable when further information was obtained. The unclear category is used when the case is likely to be suitable but something is missing (or misread) that makes it cast iron. I also understand that a number of the initially graded unsuitable ones were also regraded. Although some of the firms have dropped their pension transfer permissions. The FCA did target certain firms. Not all were IFAs and some were transfer factories. (which should all be shut down IMO and the FCA is getting round them slowly).

The FCA ordered a firm to review past advice as it felt had issues on advice suitability. They instructed an independent third party to carry out the S166 review and they checked the cases and not a single one ended up as bad advice.

I know a local firm that was a network member that was caught up in a s166 review and he had over 110 cases checked and nearly half were initially graded as unsuitable. He showed me some of them and the checking was really poor quality. It was a real eye opener. He got all but three overturned. One was because of a corrupted PDF in a minor document on a potential alternative option (not the thing he did). The other two was because there was guaranteed growth rates on the existing WP fund and they didnt feel the suitability report gave enough detail about them. No redress was paid on any of them as the alternatives had all done better. These things always have context and you need to look beyond raw figures. If you looked at his initial figures it would show nearly 50% unsuitable.

However, the report also highlights the risks to advice firms. The FCA has never given any examples of what is right. Its approach is that you do them and we will check some later and if they are wrong, we will tell you then what you should be doing.

It is also worth noting that the FCA did not like the adviser not making a recommendation without knowing where the transfer proceeds would be invested. It also highlighted the risks of the advice not making a recommendation for the receiving scheme. The exact things you are asking for an IFA to do.

The bottom line is that you dont want to use an IFA. We get that. IFAs dont want to deal with people like you either. We didnt ask for this.

FA's would have you believe that they are liable for my decision, but evidence provided here earlier was not consistent with this position.

You have provided no evidence to support that. And the adviser carries the liability for life in some cases. Allowing you to completely balls it up and 30 years later put in a try-it-on complaint with an ombudsman that is very liberal in its approach to consumers.

northeastcanuck

freddymoney wrote: »

I have managed to accumulate a significant amount of personal wealth that most people can only dream about, that is down to hard work and a number successful investments that have all been of my own doing. I am 63, the best I could hope for in another 20 years. I don't need an IFA t map out the rest of my life for me, all I need is someone to move my DB scheme into a holding area while I decide what to do with it. It is as simple as that.

With all due respect, based on what you posted earlier regarding how you gained your personal wealth, it all appears to be your DB pension and property. Your DB pension had nothing to do with you, all you had to do was be lucky enough to be around when they were available to join - the pension trust did the hard work. And as for property, not exactly difficult as anyone your age who bought property has generally made a LOT of money from it - more just lucky timing than anything else. And based on what your investment plans are for your DB transfer, luck is what you are going to need, that's for sure.

It's very clear that these rules exist to save some people from themselves.

Oldskool90

dunstonh wrote: »

The report isnt that damning when you realise that virtually all the unclear were converted to suitable when further information was obtained.

Perhaps you should speak to the FCA and ask them to clarify it, as we only have your word on that...

dunstonh wrote: »

The bottom line is that you don't want to use an IFA. We get that. IFAs dont want to deal with people like you either. We didnt ask for this.

That's a fair point. IFA's don't like dealing with informed people. I I agree that most would argue that the FCA have screwed this situation up and in many cases allowed IFA's to turn it to their advantage. IFA's have a captive market and they know that, hence the majority insisting on ongoing business....conflict of interest

dunstonh wrote: »

You have provided no evidence to support that.

From an earlier link pasted to support that IFA's are liable even when client is insistent. Client was not advised correctly in this case.

"When he complained to Openwork, the intermediary argued it did not advise Mr M to transfer his pension to a Sipp and when the adviser gave the transfer advice he did not consider whether Harlequin was a suitable investment.

Following an alert the regulator issued in 2013, Openwork accepted the adviser should not have advised Mr T to transfer to a Sipp without also considering the suitability of the underlying investment.

However the Financial Ombudsman Service ruled Mr M would not have gone ahead with the investment had Openwork acted properly and recommended the intermediary compensate him for his losses. "

xylophone

From an earlier link pasted to support that IFA's are liable even when client is insistent. Client was not advised correctly in this case.

I think that what struck me in that article

https://www.ftadviser.com/pensions/2017/03/03/fos-dismisses-openwork-s-insistent-client-argument/

was

“In my experience, consumers who seek out financial advice are unlikely to act against that advice.

I wonder how true that is of those who want to transfer out of a DB pension (blinded by the £ sign) and are advised against?

Oldskool90

xylophone wrote: »

I think that what struck me in that article

was

“In my experience, consumers who seek out financial advice are unlikely to act against that advice.

I wonder how true that is of those who want to transfer out of a DB pension (blinded by the £ sign) and are advised against?

That may be true for some, and that should their look out. In my case the funds will take my SIPP to a level that I believe if I invest in solid companies, over the long term it will provide for my needs and more importantly it will be there for my dependents and future generations. A DB, like annuities appears to have limited capacity to pass on as part of your estate. This is a compelling reason for me why "products" need to be evaluated carefully

dunstonh

A DB, like annuities appears to have limited capacity to pass on as part of your estate.

Pensions are not included in your estate. Annuities can be passed on now. The 2015 changes gave more options on death benefits.

freddymoney

I have had a very productive morning, I have spoken to two IFA's who was very professional, they gave me plenty of time to discuss my situation and I didn't get any pressure. Cost for the advice is £1,250.00 and for the transfer £1,250.00. All was well until I discovered management fees after the transfer is compulsory. Therefore, I will be committing to £4,500.00 in fees for as long as its being managed. I think I am better off sticking with my DB scheme.

dunstonh

I have spoken to two IFA's who was very professional, they gave me plenty of time to discuss my situation and I didn't get any pressure. Cost for the advice is £1,250.00 and for the transfer £1,250.00. All was well until I discovered management fees after the transfer is compulsory.

IFAs cannot insist on ongoing fees. Some FAs can (because you need to use their funds which have the charges built in)

I think I am better off sticking with my DB scheme.

If the decision is that marginal, then it may well be the case that is best.