PensionsJan 7 2016

Be prepared to walk away from insistent clients: PFS

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Be prepared to walk away from insistent clients: PFS

Advisers should walk away from clients insisting on selling their annuities like they are already doing for DB transfers, Keith Richards has said.

The chief executive of the PFS said he expected the announcement by the Treasury would lead to more clients insisting that their advisers sign off the sale of their annuity regardless of their recommendation.

It is an issue similar to the one presented by DB transfers for which the government has mandated the need for advice if the pension is worth £30,000 or more.

Mr Richards said: “The Personal Finance Society has been in discussions with the Treasury regarding the secondary annuity market and is cautiously supportive of its objectives.

“Mandating advice however, will risk increasing the number of insistent clients to the problem that has already been growing for safeguarded benefits since the launch of pension freedoms.

“The issue of insistent clients seems set to roll on into the new year, with advisers still uncertain as to future treatment by both the FCA and Fos.”

He added: “Advisers need to demonstrate their true value and be relied upon to only act in their client’s best interest, even if that means walking away from a commercial opportunity.”

A consensus appears to have emerged among advisers on the issue of clients insisting on DB transfers. A survey conducted by the PFS showed 81 per cent of members saying they would not facilitate an insistent transfer if they believed it was not in the best interest of the client.

Only 2 per cent were willing to comply on all occasions in support of the new pension freedoms.

Mr Richards said: “The number of advisers willing to engage in the secondary annuity market is currently unclear and we have been reviewing any additional requirements for advisers who decide to advise in this particular area.”

Background

The Treasury has said the requirement for advice will depend on the value of the annuity but the threshold for this has not yet been agreed.

Annuity-related advice may also depend on the client’s financial circumstances, the Treasury has said.

A secondary annuity market will come into effect from 6 April 2017.