Health check your advice processes

Health check your advice processes

Q: How can companies reduce the risks around defined benefit pension transfers during the Covid-19 crisis?

A: The hallmark of business success is providing good outcomes for your clients.

Give sound financial advice, build trust, and clients will rely on you for years to come.

But how can you do that if you cannot see the stumbling blocks up ahead?

Market volatility and extra pressure on client finances as a result of Covid-19 have made potential mis-steps all the more likely, making a high-risk area like DB pension transfers a whole lot riskier.

Staying 100 per cent focused on your clients will help you manage the increased risk of DB pension transfer advice. 

Make sure you are spotting vulnerability

Some clients will find themselves to be vulnerable for the first time during the Covid-19 crisis. 

Some might lose their job, and many will see the value of their investments drop.

Those who are struggling financially might be tempted to transfer to a defined contribution scheme for a quick windfall.

But remember, this is unlikely to be the best thing for them further down the line.  

Your frontline staff are your first line of defence here.

Provide extra training on the questions they need to ask to fully understand your clients’ circumstances and objectives. 

Clearly communicate risks

While in some cases a transfer will be the best option, clients can still harbour misconceptions about the benefits this will bring them.

These need to be properly addressed and clients should be fully aware of the investment risks.

Most of all, risk warnings need to take the current circumstances into account.

So if the value of a client’s investments has fallen due to Covid-19, make sure they know they will only receive the current value. 

That might be easier said than done now that face-to-face communication is off the cards.

You will need to test the effectiveness of your remote communication methods, ensuring necessary information is still clear. 

Health check advice files

Remote working has its own inherent risks, but it is an arrangement that is unlikely to change any time soon.

If your compliance teams are struggling to carry out checks in the same way, any mis-steps are likely to fall through the gaps.

So, it would be wise to give your business assurance a temporary boost. 

That could mean recording all client phone and video calls, checking a wider population of files, or dedicating extra resource to manage an existing workload.

Either way, when we eventually emerge from this crisis, the Financial Conduct Authority will want to see evidence of how you have provided good outcomes during this period.

Enhance your complaints handling function

Despite your best efforts, it is likely you will see an upsurge in complaints.

Clients will have seen a significant drop in their portfolios and may well now be lamenting the fact they gave up a guaranteed income.