Defined benefit transfer advice, what's changing?
In their consultation paper released in July 2019, the FCA proposed the end of contingent charging and the introduction of 'abridged advice', while reinforcing the FCA's opinion that any form of personalised advice advice would constitute advice.
Banning contingent charging has the potential to leave a significant gap in the DB advice market. Fortunately, the FCA's proposal to allow abridged advice in this area goes some way to closing it.
DB transfer advice, especially for clients that are advised not to transfer, may well appear very expensive. Previously, many advice firms have tried to mitigate this by formally or informally triaging a proportion of enquirers away from taking DB transfer advice, but going forward this is clearly a non-compliant process unless it is delivered as advice.
The FCA has stated that advice can be given not to transfer without the need for collecting detailed scheme data or the provision of the Transfer Value Comparator. Removing these elements from the process means clients and advisers can benefit from a shorter and more cost-effective advice process when appropriate.
Abridged advice will give clients greater confidence that they are making the right decision in taking out defined benefit transfer advice. If it is very straightforward to establish that the advice should not be to transfer, they only have to incur the cost of an abridged service. This solution will sit well between an education and guidance service and a full advice service, enabling the adviser to provide the right solution depending on the client’s needs.
Defined benefit advice suite
Efficiency, consistency and compliance are key to delivering DB transfer guidance and advice that meets clients’ needs cost-effectively.
Wealth Wizards have already developed a suite of services for advisory firms including:
- DB transfer guidance, providing compliant education and guidance which can be deployed digitally for clients to engage with.
- Full DB transfer advice, providing advisers with a hybrid tool to provide efficient, consistent advice.
We welcome the proposal for abridged advice in CP19/25 and have developed a digital module which is set to support this service.
- Abridged DB transfer advice.
Our team of DB experts have mapped out the defined benefit advice process extensively and have identified the key factors that determine whether a client should clearly be advised not to transfer, or to proceed to full advice, created as a fully-digital client journey.
This abridged service will reassure those clients who are clearly better off remaining in the scheme and ensure that only likely-to-transfer or marginal cases move to a fill advice process and incur additional cost.
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