The Personal Financial Society's new quality assurance for advisers conducting defined benefit transfers is expected to decrease the number of insistent clients, Keith Richards (pictured) has said.
The PFS chief executive told FTAdviser that the Pension Transfer Gold Standard, which has been adopted by nearly 400 companies in two weeks, will help clients understand what to expect if they get DB transfer advice.
Mr Richards said: "We are hoping it will help to mitigate some of the pressures around insistent clients, because the consumer will understand from the outset that an initial review has to be undertaken, and the adviser might recommend that it is not suitable to transfer out, and that there will be a charge for the service."
The advice companies wanting to adopt the gold standard will have to adhere to a code based on nine principles underpinning good practice when giving pension transfer advice.
This initiative was created by Pensions Advice Taskforce, a group set up by the PFS to increase consumer awareness and protection in areas of complex pension advice, and also includes a consumer guide.
FTAdviser reported in February that pension schemes will be asked to send a copy of this guide to members when they request a transfer value.
The Money Advice Service and Pension Wise, now merged together as Money and Pensions Service, will also be promoting the document, Mr Richards said.
Tony Miles, joint secretariat of the Pensions Advice Taskforce, also explained that advisers would need to introduce a clear education process in their advice structure, which is one of the gold standard principles.
He said: "Any consumer will better understand the advantages and disadvantages of transferring or not, irrespective whether they then go on to take advice, and that is quite critical. We are also confident that this will have an impact on reducing insistent clients."
For an advice company to receive the quality badge, it needs to comply with all nine principles, have regulatory permissions for provision of pension transfer advice, and have professional indemnity insurance which meets the Financial Conduct Authority threshold conditions.
To assure that these advisory firms comply with the standard, the PFS will be doing some sample random testing among the companies, similar to what it currently does with CPD requirements, Mr Richards explained.
Mr Miles said that some of the gold standard principles were numeric, so they were “very easily testable”.
Registration will need to be renewed on an annual basis and firms should be prepared to provide evidence that they have adopted the principles of the quality badge.
But Mr Richards argued that the PFS isn’t attempting to introduce “another layer of regulation for advisers”.
He said: “Far from it, this is about doing something that better informs and prepares members of the public before they get to see an adviser.
“Pension freedoms gave all the wrong messages to the public from the outset; that people were free to do what they want, when they want, how they want, with no caps, restrictions or limits.