More than 80 per cent of advisers say they would refuse to facilitate a defined benefit pension transfer if they deemed it not to be in the best interests of their clients, according to research conducted by the Personal Finance Society.
Of the remainder, 16 per cent said they would consider the facilitation of a transfer in line with Financial Conduct Authority guidelines and just 1 per cent would do so on the basis of not wishing to turn a client away and into the unregulated advice arena.
That left only 2 per cent who were willing to comply on all occasions in support of the new pension freedoms.
The findings come after 1,884 members took part in the society’s annual member survey, with more than 1,100 advisers responding to a specific question on ‘insistent clients’.
The PFS’ chief executive Keith Richards said the statistics underline the potential for conflict between the principle of freedom of choice and providing the best outcomes for consumers.
The PFS first raised concerns with both the government and FCA back in March, highlighting the need for greater protection and clarity for the public and the advice profession, stemming from the unintended consequences of the pension reforms.
“We stressed the need to develop a pro-active solution before the risks force everyone’s hand,” stated Mr Richards, adding earlier this month he had discussed the matter with the pensions minister Ros Altmann.
In September, the regulator hit back at claims from the PFS that it was “dodging” the insistent client issue, stating it has already published guidance for advisers.
Earlier this year, FCA technical specialist Rory Percival outlined a three-step process to help advisers not get caught out by insistent clients. He said they should provide advice in a concise manner, emphasising the need to ensure the client’s understanding of the recommendations.
Secondly, advisers should make clear what the risks are if a client wishes to go down a different route to the one the adviser has recommended. Finally, if the client decides to go ahead, advisers must be clear that this was not their recommendation.
Mr Richards stated: “Our survey shows that advisers do not want to get caught up in facilitating poor consumer outcomes, let alone carry the unlimited liability which comes with it and the uncertainty of future regulatory action.
“Urgent change is therefore needed to allow consumers who are insistent on making their own informed decisions to accept the responsibility of doing so.”
The PFS member survey also revealed that more than half had been approached to facilitate DB to DC transfers without advice.
Mr Richards pointed out that when faced with a refusal, clients naturally become angry and confused; frustrated by what they see as a conflicting restriction to prevent them accessing their cash.
“They have been led to believe that it’s ‘their money, their choice’ and cannot understand why the overwhelming majority of professional advisers will not provide a facilitation service.”
To try and solve the growing problem, the PFS have proposed the introduction of an independent risk warning by the trustee.
This would include confirmation that the client has instructed a transfer against professional advice, thereby empowering the client to take responsibility for making their own informed decision and indemnifying the trustee, adviser and Financial Services Compensation Scheme against any future compensation claim.
peter.walker@ft.com
