- Full fact-find;
- Risk assessment; and
- Consideration of the benefit structure from the client’s existing scheme.
It must be carried out or checked by a pension transfer specialist, involve a suitability report for advice not to transfer and cannot involve assistance to transfer or convert unless the client has taken full advice.
Companies will need to offset the abridged advice charge from any full advice charge unless the client uses different advisers for abridged advice and full advice.
They should also be aware that as abridged advice does not permit companies to consider a proposed receiving scheme it may well be subject to VAT, although the FCA’s policy statement on abridged advice does not provide any guidance, saying: “The VAT treatment of abridged advice is a matter for HM Revenue & Customs.”
Businesses can provide abridged advice free of charge but must not do so in an attempt to game the ban on contingent charging.
The FCA has made clear that companies must have a clearly defined policy in respect of dealing with clients who qualify for abridged advice, and this should include a description of how, and the circumstances in which, a company might move from abridged to full advice.
Will abridged advice work?
It is clear that the FCA is attempting to resolve significant issues with its proposals: the problems around giving personal advice during the non-advised triage process, the cost of full advice and the understanding, right from the start, that the majority of DB pension scheme members will not benefit from a transfer.
Will abridged advice be a happy medium, or does it fall into the category of ‘neither fish nor fowl’? Only time will tell, but opinion in the sector is divided on the matter.
The process around abridged advice is likely to be a little unsettling to clients. In many cases, they will be making a commitment to pay a fee for a service, but the only outcomes will be that they are told not to transfer (which may well be unwelcome news) or they are told they have to go on to a second stage of the process, or indeed a different advice business that will incur more expense.
At the end of the process they may be told they should not transfer after all.
For advice businesses, using the abridged service may save them time and allow them to offer a valuable service to clients at a reasonable cost.
But they also need to manage risks. If, at some point in the future, it transpires that a client would have been well-advised to undertake a transfer (for example because of health issues that were not clear at the time), the adviser will need to have gathered enough evidence about their decision-making process to demonstrate that they were giving the client suitable advice, considering the information that was available at the time.