Specific questions pertinent to DB transfers should be included within normal fact-finding.
This should include, but not be limited to: a record of the client’s attitude towards transfer risk (not just investment risk); their opinions and feelings about the importance of their objectives; and their views on the viability of potential alternatives.
All answers should be specific to the client’s situation, with direct client quotes used where particularly personal/emotive subjects are discussed, as they always should be.
Ultimately, conversations around ‘soft facts’ are vital in being able to understand and demonstrate your understanding of why the client is considering a transfer.
Do not just confirm understanding, demonstrate it
It is also beneficial if the client, even at this early stage, can demonstrate their own general understanding of the benefits of their existing pension and the risks involved in transferring.
This can be assisted by the provision of triage-type standardised documentation beforehand, but the key is recording their understanding in their own words.
This will help reassure you that your client knows exactly what they are getting into and no future complaint could, or should, be based on a lack of client awareness of the risks.
Advice – clear, fair and definitely not misleading
When it comes to advice, matters become a lot more nuanced and one-size most definitely will not fit all.
Abridged advice, which only takes into account basic client circumstances, is not yet a regulatory requirement.
In addition, it is not yet clear whether this would help to defend any future advice-based complaint.
However, certainly the principle of providing an additional touchpoint, where the general risks and implications of transferring are outlined to the client prior to committing to full advice, would not do any harm at all.
By opting into full advice, clients are at least indicating their acceptance of these warnings.
Ultimately, in the event of a future complaint, the Fos would want to see that you have given serious consideration to all potential alternatives open to your client, and this means a lot more than paying lip-service.
Where an alternative solution to the client objectives is determined to be more viable within the appropriate pension transfer analysis, this should be discussed in detail with the client prior to making a recommendation.
The client’s own thoughts towards these should be recorded and ultimately where you deem these preferable to transferring, this is likely to form part of any negative recommendation.
The Fos would also expect to see that serious consideration is given to any early retirement options offered by the existing scheme, as this would generally be considered a less risky option than transferring and therefore more appropriate.
Examine precisely how the scheme benefits could potentially fit into your clients’ objectives (even if some level of compromise would be required on their part) and always discuss this option, however much this may not be the case.
