Independent Benefit Consultancy (IBC).
It’s one of the largest IFAs (Independent Financial Advisers) in Scotland, with multiple offices across the country. Not only does it have four advisers with specialist pension transfer qualifications, it’s also been awarded the Personal Finance Society’s ‘Pension Transfer Gold Standard’. Sounds good, right?
But when the industry regulator, the Financial Conduct Authority (FCA) paid them a visit, things weren’t quite as rosy as they seemed. During a review of their business model, the FCA found significant issues with the firm’s advice process and told them to cease final salary pension transfer advice from the 2nd June.
Unfortunately, IBC is not the only case. Concerns have been raised over approximately 3000 IFAs in total throughout the UK and over 700 have now given up their pension transfer permissions. With so many ‘gold standard’ companies being questioned, it begs two questions:
- Can you trust your IFA?
- How do you know if you’ve been given poor advice?
The FCA’S pension transfer advice checker
In light of its findings, the FCA has now released an ‘advice checker’ for consumers.
This is a quick-and-easy tool to help you determine if you were given unsuitable pension transfer advice. Essentially, it’s a checklist of information that your IFA should have gathered – prior to advising a final salary pension transfer. If you answer yes to any of the statements listed, you may have received sub-par guidance and – as a result – could be entitled to claim for compensation.
Final salary (or defined benefit) pension transfers are rarely a good idea. There are only very specific circumstances in which it would be beneficial. Which is why, it’s vital that your adviser conducts a detailed analysis of your personal situation – before making a recommendation.
This analysis is known as ‘the advice process’ and can be broken down into three main steps.
A three-step pension transfer advice process
The adviser should begin the process by telling you about themselves, including:
- the type of firm they work for
- whether they can offer independent or restricted pension transfer advice
- the services they can offer
- the cost of their services
Crucially, a good IFA will be open and honest from the start. All of this information should be disclosed before any advice is given – therefore allowing you to consider the services available and whether they’re right for you, before moving forward with the process.
2. Know your client
Once you’re happy to continue, the next step is for the adviser to complete a thorough ‘factfinding’ exercise. This is (arguably) the most important part of the process, as it decides whether a final salary pension transfer is suitable for you. They should ask many questions surrounding your:
- personal circumstances
(i.e. marital status, family, health, knowledge of investments, tax position, income and expenditure, assets and liabilities, planned retirement age, inheritances etc).
- risk profile
(i.e. your attitude to risk, the level of risk you need to take to fulfil retirement goals, your understanding of the general risks associated with a final salary pension transfer)
- objectives and needs
(i.e. your priorities and plans for the future)
Based on the information collected, the adviser can then start to consider the options available. This is known as the ‘research’ phase of the advice process and involves:
- comparing the benefits of your defined benefit pension to that of new products
- investigating where the money would be invested if a transfer took place
The goal of the adviser is to establish the most beneficial outcome for you and ensure that the defined benefit pension transfer advice is tailored specifically to your circumstances. One clear recommendation should be given and this should be presented in a ‘transfer analysis report’ – which outlines the recommendation, how they arrived at the decision, and why it’s the right thing to do.
Think you’ve fallen victim to poor advice?
If your IFA failed to cover the steps detailed above, the chances are you’ve received poor final salary transfer advice – and you may have moved your pension pot into an unsuitable scheme.
But, thankfully, there are things you can do to help rectify the problem. For example, you can claim for free to the Financial Ombudsman Service (FOS), the Pensions Ombudsman (TPO), or the Financial Service Compensation Scheme (FSCS). If you have it, you can also claim on your personal insurance for financial mis-selling or directly to the firm with which the claim relates.
Alternatively, if you’re still unsure about the suitability of your final salary pension advice – and would like further guidance – we’re always happy to help here at Money and Me Claims. Our specialists have excellent knowledge of the advice process. And, after reviewing your case, they will be able to advise on your eligibility to claim and take care of everything on your behalf.