Defined Benefit  

Warning of 'huge variations' in adviser triage processes

Warning of 'huge variations' in adviser triage processes

More than two thirds of advice firms have an initial triage process for defined benefit (DB) pension transfers, but the approach "varies hugely" across the market, research from Royal London has shown.

A survey of almost 400 financial advisers by the mutual insurer found while some financial advisers conducted full interviews and undertook transfer value analyses (TVAS) as part of their triage processes, others were more careful and merely include a quick educational conversation with the potential client.

When Royal London asked advisers what percentage of clients were triaged and did not then take things further, replies ranged from nil to more than 90 per cent. 

Article continues after advert

In March, the Financial Conduct Authority (FCA) said it was consulting on guidance on how firms can provide an appropriate triage service that gives factual and generic information without stepping across the advice boundary.

The watchdog said if triage was to be a non-advised service, it should be an educational process so that consumers can decide whether to proceed to regulated advice.

Firms can achieve this by providing generic, balanced information on the advantages and disadvantages of pension transfers, the regulator added.

Respondents to Royal London's survey were split as to whether new rules for triage from the regulator would be welcomed.

Although the majority supported the proposal, about one in three advisers thought consumers could lose out if rules around triage were tightened up.

According to Steve Webb, director of policy at Royal London and former pensions minister, the survey revealed a "huge variation in adviser practice", which made it understandable that the FCA was looking to provide greater clarity and standardisation in this area.

He said: "But there is a risk if the FCA clampdown makes advisers afraid to offer an initial triage process.

"For some clients it is clearly not going to be in their interests to spend a large amount of money only to be told that transferring is not a good idea.

"The FCA needs to provide a ‘safe harbour’ for advisers which would allow them to have such a conversation with a client at an early stage, without putting themselves at regulatory or legal risk."

Several providers have proposed solutions for a triage service, such as Aegon, which has suggested a traffic light system, with red, yellow and green indicators for prospective DB transfer clients.