Digital financial advice firm Wealth Wizards is rolling out a tool to allow advisers to offer abridged advice around defined benefit (DB) pension transfers.
Abridged advice, which was mentioned during a recent Financial Conduct Authority (FCA) consultation, is a concept that sees IFAs give a short form of advice that can only result in not to transfer DB pensions, based on a high-level assessment of a client’s circumstances.
Wealth Wizards plans to offer the service to advisers as a white label product that firms can integrate with their own platforms.
Bridge the gap
Andrew Firth, chief executive of Wealth Wizards, told International Adviser: “We have mapped out the defined benefit advice process extensively and have identified the key factors that determine whether a client should clearly be advised not to transfer, or proceed to full advice, created as a fully digital client journey.
“This abridged advice service will reassure those clients who are clearly better off remaining in the scheme, and ensure that only likely-to-transfer or marginal cases move to a full advice process and incur the additional cost.
“When the consultation process is completed, if it is then adopted into the regulations, our tool will bridge the gap very nicely.
“We would want to make the tool available to as many DB scheme members as possible, whether that is via advice firms or scheme administrators/trustees.”
Market need
Firth said that this tool was “absolutely” needed in the advice market and added the firm is not aware of anything else like this is in the sector.
“The previous FCA policy statement made any form of personalised guidance on DB transfers to be against the rules, which took away the process most advice firms followed,” said Firth.
“By now potentially banning contingent charging, you are taking away the option for firms to deal with ‘no cases’ cheaper than ‘yes cases’. So, without abridged advice there is a very wide gap.
“We’ve been working on this module for several months, in order to build out our DB suite of digital modules so that there is a service to suit every client’s needs.
“What we think what puts us in a fairly unique situation, is the fact that we have been working for over two years on digitising the full DB transfer advice process.
“So, this made it much easier for us to work out which parts of the full process are the key ones to safely and confidently get you from a ‘probable no’ to a ‘definite no’.”
Industry reaction on abridged advice
The FCA consultation sparked this idea of abridged advice.
The adviser is expected to conduct a full fact-find and risk assessment, including an assessment of the client’s attitude to transfer risk in line with the FCA’s guidance on assessing suitability.
In a recent survey by Prudential, only one in five (20%) advisers said they’re likely to get involved.
Some 47% don’t think they would and, at this stage, a third (33%) of advisers are unsure.
