Defined Benefit  

Adviser bags client £74k for missold DB transfer

"Ambulance-chasing CMCs typically charge 35 per cent plus VAT. On that basis the client would have paid £31,360 as a ‘success fee’ to the CMC. Our charge based on time spent was just £750."

He added: “I would urge every genuine IFA firm to obtain the claims management permission and to offer an ethical, honest claims service.

“There are people out there who are genuine victims of mis-selling. If we and firms like ours can make victims whole again at minimal cost then that has to be good for the reputation of the profession as a whole.

“Our process starts by vetting the claim and by explaining how the client can claim for free via the Fos and FSCS at nil cost to them. Some still want us to handle it so if we think they have a valid case we take it on for a pre-agreed fee based on the time it will take.”

But Ricky Chan, director and chartered financial planner at IFS Wealth & Pensions, warned against encouraging advisers to partake in this activity, as they may get caught out by regulation, which could affect their professional indemnity cover.

Mr Chan said: “Unless clients are willing to pay a non-contingent fixed fee to review past advice given, which is rare, this would likely have to be done on a contingent basis and firms would be forced to continually defend against sometimes speculative complaints, wasting resources and time, and affecting PI cover.

“Rather it should only be done when poor advice sticks out like a sore thumb, and is obvious that the client did not understand the risks involved and has suffered financially because of it. Then the client should be encouraged to raise a complaint to the relevant advice firm/Financial Ombudsman Service.”

Paul Stocks, financial services director at Dobson & Hodge suggested DB advice cases were different nowadays than in the 1990s ahead of the regulator's pension review.

In 1994, the then industry regulators, the Securities and Investments Board and the Personal Investment Authority (later the Financial Services Authority), established the Pension Review amid concerns about the mis-selling of personal pension policies. 

The review looked at sales of personal pension policies between April 29, 1988 and June 30, 1994.

Mr Stocks said: “Back in the 1990s the considerations in respect of DB transfers were different to today, given that they predated ‘freedoms’ and the advice no doubt hinged on high expected investment returns and annuity rates delivering a better outcome than DB schemes.”

He added: “I would strongly suspect that any recent advice being given in respect of DB advice in no way suggests that the income will be higher by transferring out, more that the nature of the benefits  can be shaped to meet client objectives which otherwise may not be achievable by remaining in the scheme.