Due diligence processes have sparked a row, with providers taking an "unnecessarily" hard line, advisers have claimed.
Victor Sacks, director at VS Associates, said robust due diligence processes were to be applauded in cases where a scam was suspected - but argued providers should distinguish these cases from more conventional transfers.
Otherwise it risked damaging the adviser-client relationship over conventional business, he warned.
Mr Sacks said: “If a company wants to increase their due diligence and be more robust they could write to the client explaining they have been in touch with the adviser to verify their registrations and so on.
“But they should first write to the adviser, explaining their reasons for sending any letters, so the adviser has the chance to speak to their client. This way the adviser can ensure the relationship is not affected and the element of trust remains.”
His comments came after Gianpaolo Mantini, a chartered financial planner at Higgins Fairbairn Advisory, criticised Standard Life after it went directly to his client to request a call to discuss a pension switch.
Standard Life also demanded copies of recommendation letters and key documents - such as proposed investment details or fee structures - sent by Mr Mantini.
He said this decision, as well as the delay it would entail, was “unnecessary”. Mr Mantini had advised on the client's pension for five years, and Standard Life had previous experience of transferring money to the new provider, Fundment.
Mr Sacks added: “I would not have been happy with Standard Life approaching my client in this way.”
But David Brooks, technical director at Broadstone, said: “Too many times regulated advisers have been at the centre of pension scams. If providers can’t trust all advisers, then they must come from the position of suspicion as the default position.
"Providers have a duty of care to ensure the advice process has been followed properly and the receiving scheme is a bona fide scheme.”
He said he’d rather be “miffed” that a provider requested some more evidence, than just “rolled over to allow scammers to make hay”.
One long-running concern has been that not enough due diligence was carried out on investments held by self-invested personal pensions, which led to many consumers losing money and claims ending up at the Financial Services Compensation Scheme.
But advisers are now concerned too much due diligence can also have poor outcomes.
Phil Billingham, director at Perceptive Planning, argued providers should only be allowed to contact clients directly when there is a concern the funds will be placed in unregulated investments.
He said: “There should be a checklist of criteria which looks at whether the pension switch is done by a regulated adviser, staying in a UK regulated Sipp, and is going to normal, regulated funds.
“If this due diligence then flags the pension switch is being done to allow investments in unregulated funds, then the provider is right to write to the consumer directly without first going to the adviser to express their concerns."
However, Tim Morris, independent financial adviser at Russell & Co, said: “Regardless of why a provider may want the information – which may legitimately be to check the advice and protect the client – they should ask the adviser for the information and not the client.”
“As long as the client has signed the adviser’s paperwork, there shouldn’t be any problem.
“If it can help stop scams I am in favour of due diligence. But not how it has been applied in [the Standard Life] example.”
Provider stance
Standard Life told FTAdviser that it follows the industry’s code of conduct ‘Combating Pension Scams – A Code of Good Practice’ when carrying out pension switches.
A spokesperson said: “All our customers are subject to an initial due diligence check and then depending upon the information provided, additional enhanced due diligence may be required.”
Approaches can vary across the industry. Canada Life said that in the case of a simple fund switch it would check that the request is from the client or their IFA. If a scam were suspected, the team would refer the switch to their team lead or internal risk and compliance function.
Andrew Tully, technical director at Canada Life said: “When the client is transferring away we would look closely at the details of the scheme. For example, if the scheme was relatively new, was on our list of potential scams, or if the client had been recommended the scheme via an introductory firm that wasn't a professional adviser.
“In these cases, we would always ask to see further documentation on the scheme such as investment details and fees.”
Meanwhile AJ Bell does not require any due diligence if it is a straightforward switch to a well-known provider, and in a case where it is not it is automatically referred to a team of specialists who conduct due diligence on the scheme and the parties involved.
A spokesperson for AJ Bell said: “We do ask if the client has received regulated advice and who they received it from, but we don’t look into the advice process itself. The fact there is an FCA-authorised individual advising the client is usually taken as a positive.
“We do ask for scheme documents and investment details, but this forms part of the due diligence on the scheme and the customer, rather than the advice process.”
Aviva said if a switch or transfer request is flagged, it will send a questionnaire directly to the client, even if the request has been raised by an adviser.
It will ask whether the client has received advice, and who from, and also ask about investment details and fee structures.
amy.austin@ft.com
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