The possibility of increased professional indemnity (PI) insurance premiums is not deterring national advice firms from offering defined benefit (DB) transfer advice, New Model Adviser® has discovered.
PI insurers have become increasingly reticent to offer cover for DB transfers. Their nervousness comes in the wake of bad news regarding transfer advice suitability. Last year the Financial Conduct Authority (FCA) judged less than 50% of transfer cases to be clearly suitable in a study of 13 firms. Advice that saw British Steel workers' pension transfers put into high charging funds through unregulated introducers then made national headlines.
Last month national advice firm Mattioli Woods announced it would cease offering DB transfer advice due to the increased cost of obtaining PI insurance and the extra resources it would have to dedicate to it.
However, many of the largest national advice names have told New Model Adviser® they will remain committed to the DB transfer advice market.
These firms are:
- Ascot Lloyd
- St James’s Place
- Chase de Vere
- Foster Denovo.
Openwork said while transferring out of DB scheme is not in the best interest of many consumers, each case needs to be considered on an individual basis. ‘For that reason, Openwork will continue to service the DB transfer market, albeit at the relatively small levels that we process currently,’ it said.
Intrinsic claimed that while it is not halting DB transfers, this is not a big part of its business. Less than 10%, a total of around 8% of its advisers are pension transfer specialists, it said.
Foster Denovo confirmed its intention to remain in the market. ‘We are committed to providing holistic advice to our clients, and we believe that means making sure we have qualified specialists available with the knowledge, experience and qualifications in DB transfers, should the need arise.’
The firm said its existing PI insurers are ‘comfortable’ with the processes and procedures it has in place. ‘This includes our DB pension transfer forum, which reviews each and every case to make sure the adviser has considered every option at the outset; giving further guidance if necessary. Our forum consists of experienced and qualified DB specialists, our pension transfer specialist and senior partners. Any recommendations will then also be finally assessed and approved by our appointed pension transfer specialist,’ Foster Denovo COO Helen Lovett added.
SJP also stated that it does not anticipate any problems renewing insurance for DB transfers..
While Chase de Vere added it will continue to give advice on DB pension transfers, it said it has not been actively targeting this business. ‘We have a robust analysis system and a non-contingent charging structure,’ it said.
The FCA is considering a ban on advisers charging contingent fees for pension transfers, where the firm only charges the client if the recommendation is to go ahead with a transfer.
Openwork acknowledged that the current climate following high-profile DB transfer cases has led to a change in insurers’ assessments. ‘Openwork has continued to secure sensibly competitive PI terms, but through the broking process you can sense the insurers’ caution based on the disproportionate risk that they see in DB transfers. We believe our relatively low volume of recommendations and rigorous processes have contributed to the terms we’ve agreed,’ it concluded.