Advisers need ‘safe harbour’ to carry out DB triage process, says Webb

Hannah Godfrey writes

The FCA should provide a “safe harbour” for advisers to undertake early-stage conversations on defined benefit (DB) transfers that will not put them at regulatory risk, Royal London’s Steve Webb has said.

In March, the Financial Conduct Authority (FCA) published a consultation paper on ‘improving the quality of pension transfer advice’ and raised concerns the ‘triage’ process – whereby advisers give an initial steer to clients about a pension transfer inquiry – could cross the boundary into regulated advice.

The FCA is encouraging advisers to make sure any initial response is purely generic and educational, and not specific to the client’s individual circumstances.

Royal London director of policy Steve Webb, however, suggested the regulator’s plans to tighten practice around triage could lead to adverse customer outcomes.

He argued a “safe harbour” should be offered to advisers where they could use their experience and judgement to give an initial view to clients, potentially saving them thousands of pounds in advice fees where there is a strong likelihood of a recommendation not to transfer.

Webb also said this ‘safe harbour’ should allow advisers to have such a conversation with a client at an early stage without putting themselves at regulatory or legal risk.

Advisers split on process

Royal London surveyed almost 400 financial advisers in June in order to find out more about the triage process.

The research uncovered a wide variation in how firms approach the idea of triaging clients – for example, some firms started from a strong presumption against transfers and actively sought to discourage clients, some undertook extensive and personalised analysis, while others were careful to do nothing that could be seen as personalised advice.

On the FCA’s proposal that advisers should be more careful about crossing the line into advice when undertaking triage, advisers were split as to whether this would be a good idea – although a majority supported the proposal, around one in three thought consumers could lose out if rules around triage were tightened up.

‘Huge variation in practice’

Webb said: “Our survey revealed a huge variation in adviser practice, with some advisers having a very general initial conversation with clients and others doing extensive personalised analysis, while still seeing this as part of a triage process. So it is understandable the FCA is looking to provide greater clarity and standardisation in this area.”

He warned the FCA clampdown might make advisers afraid to offer an initial triage process, adding: “For some clients it is clearly not going to be in their interests to spend a large amount of money only to be told that transferring is not a good idea,.

“The FCA needs to provide a ‘safe harbour’ for advisers, which would allow them to have such a conversation with a client at an early stage without putting themselves at regulatory or legal risk.”