FCA tightens triage rules, bemoans lack of guidance understanding

Hannah Godfrey writes...

The FCA has confirmed it will tighten the rules around the triage process in pension transfer advice, while noting respondents to its consultation “showed a lack of understanding” between advice and guidance.

In its policy paper PS18/20 published on Thursday (4 October), the Financial Conduct Authority (FCA) confirmed it would continue with its parameter guidance on the triage process, which means firms must not provide any kind of personalised guidance during the triage process because they risk straying into the parameters of regulated advice.

After reviewing firms’ triage services – whereby advisers give an initial steer to clients about a pension transfer inquiry – the FCA said it had concerns some firms were straying into the provision of personal recommendations, rather than offering generic information.

As such, it said, no personalised guidance should be given during a triage process. Instead, potential clients should be educated on pension transfers and provided with generic, balanced information on the advantages and disadvantages of a pension transfer.

In responses to the March consultation, some firms pointed out the process would be less useful to consumers without some degree of personalisation.

To this, the FCA said the responses showed a lack of understanding that the provision of pension transfer advice was a different regulated activity from advising on investments.

It explained: “Advice on a pension transfer can only result in one of two outcomes: to transfer or not to transfer. This limits the scope for providing guidance during triage.

“So we consider that any guidance based on a consideration of a customer’s circumstance, which steers them one way or the other, is likely to be advice on the merits of a transfer, and therefore pension transfer advice. In comparison, it is possible for firms to have broad ranging conversations about investments, for example on different asset classes, without these being considered to be advice.”

The rules will come into force on 1 January 2019.

Further ‘Can’t Do’

Aegon pensions director Steven Cameron said it was disappointing to see the FCA focusing on what advisers can’t do within a pre-advice conversation.

“We had hoped for a more ‘can do’ focus so advisers would be clear on how they could discuss which personal circumstances make a transfer more or less likely to be suitable without this being ‘advice’,” he said.

“Instead, the FCA has added a further ‘can’t do’ to their guidance. Advisers will not be able to provide clients with the new standardised transfer value comparator, showing the difference between the scheme transfer value and the cost of replacing these benefits with an annuity, without this being deemed advice. This is despite scheme trustees being able to offer these.”