Nearly two-thirds of advisers do not believe defined benefit (DB) transfer advice will remain profitable, a Prudential survey of more than 1,000 intermediaries has found.
Prudential surveyed the advice professionals just days after the Financial Conduct Authority’s (FCA) latest policy statement on DB transfers was released, which saw the banning of contingent charging on DB transfers.
The FCA also said the ban would help “good advisers”, who will often advise clients to stay put, to compete.
When asked about the change, nearly three fifths (58%) of respondents thought they will do less DB business or stop doing it altogether, with only 3% saying they will do more.
The reaction is perhaps unsurprising, as nearly two-thirds (62%) of respondents said they did not believe or were unsure if DB transfer advice will be profitable going forward.
More generally, more than two-thirds (68%) of advisers surveyed said they did not believe, or were unsure if a ban on contingent charging will lead to better outcomes overall.
Prudential also asked advisers how their DB business had evolved since the FCA launched its consultation on DB transfers in August 2019.
One in eight (12%) said they were involved but have since withdrawn from the DB market, one third (35%) said they are doing less DB business and more than two-fifths (43%) said they are doing either the same amount.
Prudential head of technical Les Cameron said advisers needed digest the detail in the policy statement and make appropriate changes if they want to stay in the DB market.
“Looking at their charging models is central, but advisers also need to consider other crucial items such as whether they will offer abridged advice and if they are satisfactorily covering the option of a transfer to a workplace pension scheme, if available. They should also consider the read across to other areas of advice, such as pension switching, especially around workplace pension scheme availability,” he said.
Cameron pointed out advisers must make changes to their businesses quickly, with the new rules taking effect from 1 October.