DB Transfer - any 'legal' obligation for my IFA to insist ongoing account management?

swinglow

Hi Folks - I have a DB transfer in progress, a 300k fund, very happy with my IFA in general and accept the need for an IFA here and the associated transfer fees for their due diligence and financial evaluation, which incidentally supports transfer (health and inheritance factors)

I am however not comfortable with being told I must put the funds in IFA selected investment funds (albeit on my preferred Platform, Standard Life )

Although the IFA has assured me his firms selected funds match my risk attitude I would much prefer to select my own blended funds, each with a clearly defined 'risk' rating matching my own risk attitude. I have years of experience managing my continuing DC fund and I am a confident investor, inside and outside of pension products.

The IFA is insistent on ongoing fund management, insisting his firm have a responsibility to ensure sound investment. I offered to make the transfer to his recommended funds then move them to take direct responsibility after the transfer. When pressed he said there is a legal responsibility for an IFA to manage DB transfer funds, he suggested I could take over them at a later date, yet to be defined. I thought maybe its my IFA 'policy' but not 'legal' requirement?
Would any kind souls with experience/knowledge of such matters please share their wisdom. ps Happy New Year to all!

sandsy

He cannot insist you continue to take his advice. However, some IFAs state they will refuse to transact the DB transfer at all unless you agree to let them manage it.

If you insist, it’s possible that he would have to re-look at the transfer as a whole to take account of the funds you would choose and your financial capability to manage this on an ongoing basis.

One way around this would be to let the transfer happen then decline his future services in writing.

dunstonh

am however not comfortable with being told I must put the funds in IFA selected investment funds (albeit on my preferred Platform, Standard Life )

Equally, many IFAs will not be comfortable with you investing them whilst they accept the liability.

The IFA is insistent on ongoing fund management, insisting his firm have a responsibility to ensure sound investment.

That is a regulatory breach. Ongoing servicing MUST be optional. No IFA can insist on it. However, some FAs do when they use their own funds.

When pressed he said there is a legal responsibility for an IFA to manage DB transfer funds, he suggested I could take over them at a later date, yet to be defined.

BS. There is no legal requirement.

I thought maybe its my IFA 'policy' but not 'legal' requirement?

It shouldnt even be an IFA requirement as they are not allowed to insist on ongoing servicing.

WillowCat

I smiled sweetly and agreed with my IFA's choice of funds. I'll probably leave it 6 months or so after the transfer is complete and then transfer out to my SIPP. It just seemed the most straight forward approach and I didn't want to risk him withdrawing his approval of the transfer.

bostonerimus

Every time I hear one of these stories it seems that people's money is being held ransom. If the IFA won't do what you want ditch them and find another. You are in charge, not them.

sandsy

bostonerimus wrote: »

Every time I hear one of these stories it seems that people's money is being held ransom. If the IFA won't do what you want ditch them and find another. You are in charge, not them.

It's not quite that straight forward. When advising on a DB transfer, the IFA must take account of where the funds are likely to end up before they can make a recommendation. The recommendation on whether to transfer out at all could be quite different depending on where the funds are likely to end up.

In particular, most IFAs are nervous to advise clients who have their own plans for the funds in case they are seen as having endorsed the clients' choice and seen as liable for those fund choices. And IFAs therefore exercise their own choice to ditch those clients and service those who will go along with the IFA's recommendations in their entirety and pose less of a threat to the business from a liability perspective.

Malthusian

sandsy wrote: »

In particular, most IFAs are nervous to advise clients who have their own plans for the funds in case they are seen as having endorsed the clients' choice and seen as liable for those fund choices.

Just to bold this point, if the IFA advises the client to transfer on the basis of "I recommend you transfer to this SIPP so you can select your own funds" or "I recommend you transfer to this SIPP so you can invest in the following funds, which you have selected" then they definitely have endorsed the clients' choice and definitely are liable for it. It's not an "in case". If you don't want to be liable you don't take money off the client for helping them do it, simple as that.

What the IFA wouldn't be liable for is if they recommended you transfer out of a DB scheme and invest in X Y and Z, and then the client did what WillowCat is doing and sacked the IFA and transferred into their own funds. (As far as we can possibly tell.)

But the general point is absolutely right. Someone transferring out of a DB scheme needs a certain level of investment growth to ensure they can still get at least as good an outcome out of their DC pension as if they'd stayed in the DB scheme. It's impossible to say whether that investment growth will be feasible if you don't know what the funds are and what level of growth those funds can be expected to produce.

"If they won't do what you want" [transact a transfer out of a DB pension and into your preferred fund selection] then you're perfectly entitled to ditch them but bear in mind it may be tough to find an IFA that will.

dunstonh

What the IFA wouldn't be liable for is if they recommended you transfer out of a DB scheme and invest in X Y and Z, and then the client did what WillowCat is doing and sacked the IFA and transferred into their own funds. (As far as we can possibly tell.)

Whilst that is totally correct, there is a caveat to that. If there was no evidence that the person had a history of self-investing and knew what they were doing, then the IFA could find themselves open to a successful complaint by allowing the consumer to get into that position. Barclays had a complaint upheld about a year ago by the FOS for allowing an inexperienced investor to access advanced options. They went on to lose a rather large amount by investing well above their knowledge and getting it wrong. It was all non-advised and self select but the FOS blamed Barclays for allowing them to do it.

The IFA can protect themselves from that by evidencing on file saying that Mr X has self invested since 200x with xyz provider using UT/OEICs/ITs with blah blah and went through the credit crunch without concern and here is a copy of his last statement of holdings. This protects the advisers backside from the type that tell you that they are experienced and know what they are doing until it is time to complain and suddenly they say in their complaint they were inexperienced and only did what the adviser told them to do.