Pension transfer specialist Tideway is relaunching its defined benefit (DB) transfer service for advisers, after withdrawing the service from some advisers and wealth managers last year.
James Baxter, Tideway’s managing partner, told FTAdviser that the firm reviewed its service – originally launched in 2016 - last year, in light of the Financial Conduct Authority (FCA) guidance in January 2017 covering the scope of the advice a specialist firm needs to provide where two firms are involved.
At the time, the firm was carrying out the transfers, but the ongoing investment advice was given by the original adviser.
Tideway – which earlier this year faced allegations of factory gating - is now looking to attract new introducers with its revamped service. Mr Baxter said the business wants to help IFAs to have a chance in the pensions advice space.
According to a report by RBC Capital Markets, this market, worth £1trn, is currently dominated by big firms such as St James Place, Rathbones and Brewin Dolphin.
Mr Baxter said: "We want to help smaller wealth managers and advisers participate in this market and believe that many of them can deliver more suitable, lower cost and more efficient ongoing drawdown solutions for clients' post-transfer than these big players."
One of the other reasons for Tideway to return to the outsourcing market now is that some advisers are being driven-away from DB transfers due to increased professional indemnity (PI) premiums, while others have such a small number of cases per year that it is not justified to pay for PI cover, Mr Baxter noted.
FTAdviser reported in July that advisers performing a high volume of DB pension transfers are having their level of PI insurance coverage reduced to £500,000, as insurers are wary of the risks involved in this type of business.
Previously, they would have the full limit of PI insurance cover without any restrictions, of £1.75m.
Tideway’s approach has always been to conduct the full advice process from start to finish, using its own fact-finding process, even if the original adviser has provided information in this area
Mr Baxter said: "Completing a thorough well-documented advice process to get the best outcome for the client on a timely basis is just the first step to a successful DB transfer.
"What happens next, for those who transfer, will ultimately determine the success or the failure of the transfer.
"Whilst some transferring clients don't need their DB pension and can invest for growth and some want to cash in quickly - or buy an alternative shape or impaired annuity and avoid investment risk altogether - the bulk of transfer clients want to use flexible drawdown."
The firm's starting point will be its own actively managed investment fund range, but it will look at other investment opportunities if needed, Mr Baxter added.
Tideway operates on a contingent charging basis, and has a set structure of fees according to the value of the transfer.
Mr Baxter said: "We will continue to use contingent charging. We understand that it is a conflict of interests, but it is explained to the client. Our advisers are on base salaries and aren't paid on a case by case structure."
He argued that most clients won't be able to access financial advice on a non-contingent basis, as most people don't have the money needed "lying around".
Contingent charging means a client only pays for the advice if they go ahead with a transfer, which the FCA stated raises the risk of a conflict of interest.
In the case of pension transfers, the adviser won't get paid unless the pension is transferred, which may mean the client giving up valuable benefits such as a lifetime of secure income when it may not be in their best interests.
In October, the regulator announced that it would carry out more analysis on whether to ban contingent charging.
Alan Chan, director of chartered financial planners IFS Wealth & Pensions, said the fact that Tideway is returning to the DB transfer market shows that they have gone back to the drawing board with the FCA and hopefully have now created a more robust advice process.
He said: "This kind of specialist advice area has been a real bottleneck in financial services in recent years so it should give consumers greater choice and allow IFAs to make client referrals to different pension transfer firms.
"Professional indemnity insurance is a significant concern for IFAs as well as the compensation culture we are witnessing which means that many IFAs, including ourselves, have chosen not to transact in this area although we are fully qualified to do so."
This article has been amended since its original publication to correct inaccuracy and clarify that the FCA had not raised any concerns in relation to Tideway or its DB transfer service. The regulator had raised concerns about some issues in the market in general.
maria.espadinha@ft.com
