Financial advisers are concerned about the Financial Conduct Authority's vision for a so-called abridged advice, with almost half saying they won't offer it less than a week after the idea was put on the table.
Advisers are particularly worried that the new advice model will leave them more exposed to complaints and that they won’t be able to offer the service at the low cost the regulator expects.
They also think it will create confusion for consumers unable to differentiate between the many types of advice now on offer.
Abridged advice was proposed by the regulator in its latest paper on defined benefit pension transfers.
It is expected to consist of an introductory chat with the client, where the adviser gets some high-level information about their circumstances and determines that the consumer isn’t a viable candidate for a DB transfer.
The adviser is then expected to conduct a full fact-find and risk assessment, including an assessment of the client’s attitude to transfer risk in line with the FCA’s guidance on assessing suitability.
The result of abridged advice can only ever be to not transfer and means that some consumers may receive a personal recommendation not to transfer without an adviser having to collect detailed scheme data, undertake an appropriate transfer analysis or provide a transfer value comparator.
During a webinar on the FCA’s proposed new rules in the pension transfers area – which also include a ban on contingent charging – Prudential polled 712 financial advisers, concluding that 47 per cent of these said they won’t be offering abridged advice.
This fell well short the regulator’s expectations, which estimated that 75 per cent of firms will be prepared to operate an abridged advice service.
Overall, a quarter (24 per cent) of advisers surveyed by the provider said they weren’t active in the DB market and with those removed from the overall results, half of those remaining (50 per cent) predicted they would do less DB business if the proposals were progressed and 14 per cent said they would stop doing DB transfers altogether.
Some 36 per cent of advisers did not think there’ll be any impact on their business from the proposals.
Paul Stocks, financial services director at Dobson & Hodge, warned the FCA's proposal for abridged advice “could well create more ‘grey areas’ around what advice is”.
He also noted that it can “potentially leave advisers open to complaints if something isn’t considered under abridged advice which the client, a claims management company or the Financial Ombudsman later feel should have been”.
Ian Browne, pensions expert at Old Mutual Wealth, said since abridged advice will result in either a recommendation not to transfer or to seek full advice, the adviser has based their decision on the personal circumstances of the client, so this should be covered by the Fos.
Rebecca Aldridge, managing director of Balance Wealth Planning, welcomed the FCA’s proposals, but said there were very few instances when abridged advice could be safely offered.