“I think the Financial Conduct Authority took their eye off the ball, but I’m probably a bit more controversial than most,” he adds.
In July 2017, Selectapension announced it had suspended all DB pension transfer business due to unprecedented demand, and then in January this year its DB transfer arm entered into liquidation.
Founded in 2004, Selectapension is made up of a team 30-odd people, led by its founder, chairman, owner and managing director Mr McCabe.
It first launched a simple pension switching tool, after which additional modules soon followed, including a pension transfer analysis tool, as demand for DB transfers grew after the introduction of pension freedoms in 2015.
Post-pension freedoms
Without a shred of doubt, the pension freedoms have been the biggest change to hit the industry, says Mr McCabe.
He says: “The retirement planning market has never been so dynamic thanks to the pension freedoms.”
“We were doing quite a few DB transfers and the demand was huge. But obviously, eventually the FCA stepped in and closed a lot of the transfer bureau houses down that were not following strict enough guidance.”
He adds: “There was just not enough protection or guidance – though of course, I still think the pension freedoms are a good thing for the majority.”
The pension freedoms also resulted in pensions becoming more of a buzzword, with people being aware of and understanding the need for a pension more now than ever.
He adds: “But there’s still a lot of gobbledygook in the pensions world.”
End of DB transfers
Following its decision to stop all DB pension transfer business in 2017, Selectapension’s DB transfer arm entered into liquidation in January.
Mr McCabe says: “It was a shame, it could have been done better... Obviously, over the last couple of years, [the FCA has] stepped up and ring-fenced everything around DB and people who still want to go through with DB transfers.”
With some 30 years’ experience with pension transfers under his belt, Mr McCabe notes that the media spotlight on transfers during 2017 “affected us for sure”.
He explains: “Unfortunately because we are one of the biggest providers in the industry we did get some bad publicity.”
He continues: “But in the end it worked in our favour; we realised transfers were not for us and we had to end our relationship with some of the advisers that we were integrated with.
“That year really made us realise that we now need to focus not just on what we develop but on the future.”
Indeed, several players in the pension market reported a slowdown in transfers towards the end of last year, as bad publicity and an added level of scrutiny from financial advisers started to take effect, while Mr McCabe says he expects volumes of pension transfers to continue to see a slow down in 2019.
Looking ahead
Mr McCabe – who, in his 50s, had his fourth child just 6 months ago – says he is passionate about bringing greater affordability to clients, by providing advisers with fast and efficient services.
He says: “It is about the customer and what they can afford, and I am all for making it cheaper, more cost-effective, compliant with the rules and user-friendly.
He says: “The market is evolving, and with auto-enrolment there will be more pensions and more money, and our endgame is to provide a one-stop-shop process for advisers.”
Indeed, the start of 2018 marked the beginning of a new journey for the company, when Mr McCabe says he started considering what other tools might be needed out there in the market.
He explains: “I have an Isa and pensions with previous companies, and I get an annual statement every year which says what I am invested in and how much it is worth.
“But what it does not say is how that stacks up against other funds or other providers in the market, and so you just do not know.
So he started working on developing a new tool, called Rapid Reviewer, with an aim to help advisers spot dog funds, which is expected to be launched in the spring.
He says: “We need to make it more affordable for clients by making it more affordable for the IFA, because the cheaper the IFA can do it the cheaper it will be for everybody.”
He continues: “Carrying out a client review at least annually is a mandatory requirement for Mifid II-regulated products and is considered best practice across the industry.
“The output generated by Rapid Reviewer will show fund performance of an existing portfolio in comparison with similar funds, taking into account retrospective charges, and it will expose poor-performing funds as well as highlight the best-performing funds.”
He adds: “What we are also potentially looking at... is consolidating all our different tools, and that’s a good three to four-year project.”
Victoria Ticha is features writer at Financial Adviser and FTAdviser.com
