Abridged advice needs to be tweaked, industry says

Speaking at FTAdviser’s Financial Advice Forum this week (September 7), panel members raised concerns about the practicality of the young type of advice, which was implemented last October.

Abridged advice sits in between triage and full pension transfer advice but can only result in a personal recommendation to not transfer out of a defined benefit scheme.

First mooted by the Financial Conduct Authority in July 2019, abridged advice begins with an introductory chat with the client, where the adviser can get some high-level information about their circumstances in order to determine that they are not a viable candidate for a transfer.

Fiona Tait, technical director at Intelligent Pensions, said the process could often be limiting as issues crop up which  advisers aren't allowed to discuss within this framework.

She explained: “We might come across a lifetime allowance issue that's relevant to the client, rather than the transfer, but they’re only paying for the abridged process up front. 

“We're not going to go into an entire lifetime allowance versus IHT sort of calculation as part of an abridged process; obviously that would be full advice.”

Tait added: “We sort of settled that we will say to the client we've noticed this issue and say we'll cover it if we get to full advice. 

“But that was something we really found out when we got into it, there’s quite a lot that falls into abridged advice.”

Tom McPhail, director of public affairs at the Lang Cat, said there was a problem with lacking member communication and guidance from trustees and said more work needs to be done between the Financial Conduct Authority and the Pensions Regulator to get to a stage where trustees can act in a timely manner.

Under current rules trustees cannot give abridged advice, they can only refer members to advisers who can.

Andrew Warwick-Thompson, professional trustee at Capital Cranfield, said sometimes trustees are reluctant to recommend advisers, whether they're giving abridged advice or full advice, because they are told that if it goes wrong they could be liable.

Warwick-Thompson thought this could change if trustees were able to facilitate abridged advice themselves and leave it up to the member to decide if they want to go on to full advice.

Once you move to abridged advice you're actually doing about two thirds of the full advice process before you can deliver itFiona Tait

He said this would give trustees more confidence in providing that as a service.

But McPhail had mixed feelings about abridged advice and what it ended up replacing.

He said: “When I was with Hargreaves Lansdown, typically of every 20 inquiries that came into the business about someone who was interested in exploring taking a transfer, only about one in 20 of those would actually go ahead.

“The informal triage systems that already existed, coupled with some advice processes that were deliverable before this regime changed, very often allowed advisers to deliver an informal process.

"Particularly where they had existing clients to spend 10 minutes on the phone, to be able to say, ‘look we really don't want to engage in this advice process here’.

“We've now moved to a world where that client is going to have to pay hundreds of pounds, just to be told the same thing.”

Warwick-Thompson questioned whether a triage-type service could be used as “baby steps” into the advice process.

He said: “I'd be interested to see whether trustees, particularly a master trust, would be prepared to at least build up that triage service, where they're actually providing some sort of ongoing guidance to their members to think about what the implications are of making the transfer, before they then pass on to an adviser who can then go through the abridged advice and then full advice. 

“So I think taking it in baby steps like this will actually make it better. I think the only frustration will be for the members who may find it an incredibly tedious process.”

But Tait said the issue was that abridged advice was a bigger step than first thought.

She said: “Once you move to abridged advice you're actually doing about two thirds of the full advice process before you can deliver it. So there's still a huge gap between what's triage and what's abridged.

“I don't know what the answer is to what fits in there but I agree. It would be lovely if something did.”

amy.austin@ft.com

What do you think about the issues raised by this story? Email us on FTAletters@ft.com to let us know