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Insistent client ‘surge’ to undermine transfer specialism

Insistent client ‘surge’ to undermine transfer specialism

A surge in the number of ‘insistent’ clients, who decide to act outside of advice recommendations to transfer their pension fund, will undermine the case for specialist pension transfer qualifications, according to Sesame.

The comments come in response to claims from the Association of Professional Financial Advisers and Tenet that new rules being brought in by the regulator on transfers would make obtaining specialist transfer permissions a ‘standard’ tool for at-retirement advisers.

At present, rules surrounding transfers mean advisers must hold a specialist qualification - such as the AF3 certificate from the Chartered Insurance Institute - to process switches, unless the client is going to crystallise their fund and start taking benefits immediately.

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If the purpose of the transfer is to ‘crystallise’ benefits - i.e. to start taking benefits immediately - then the Financial Conduct Authority does not currently require the adviser to have the pension transfer qualification, nor the firm to have the pension transfer permission.

Under new rules consulted on last month and expected to be confirmed in June, the regulator has proposed requiring advice in a far wider range of cases where ‘safeguarded’ benefits are being surrended.

However, a spokesman for Sesame said he do not expect the pension transfer specialism to “become a standard part of the adviser toolbox” as advisers were likely to recommend against transfers and event refuse to deal with an expected surge in so-called ‘insistent’ clients.

“The government’s reforms mean that certain members of defined benefit schemes require advice before they can switch out of them. In our view, this may well lead to surges in ‘insistent clients,’ if the transfers are conducted against advice.

“We believe that although there will be a clear customer need for such advice, processing high levels of defined benefits transfer business may well be outside of the risk tolerance of most advice firms.

“As such, we don’t necessarily believe that ‘pension transfer specialism’ (within the meaning of FCA rules) will become a standard part of the adviser toolbox.”

Insistent clients and the potential for future claims they represent has become a key topic of debate in the weeks immediately before and after pension reforms came into force.

Regulators have said proper documentation should protect advisers, but have as yet been unable to offer the guarantee of no future claims being sought by the Personal Finance Society as a condition for processing such business.

Chris Hannant, director general of Apfa, has said he thinks the pensions transfer specialism will become a big issue for the industry and that more advisers will seek to obtain specialist permissions.

Gill Davidson, group regulatory director of Tenet, said her network thinks “the pensions transfer specialism will become an increasing part of the adviser toolbox”, adding that they have already seen and increase in enquiries about the pension transfer specialism in recent weeks.

“Of course, referrals for occupational pension transfers can be made by firms without impacting independence, so firms specialising in this area may well see an increase in enquiries, especially given the impact of lower gilt returns on transfer values.”