DB Pensions - Be Afraid.....Be Very Afraid.....(Not me though!)
Written on 02/05/2019

I have spent 25 years in DB and Trust-Based pensions, as a consultant, client manager and in-house scheme manager, so I have seen it from almost every angle! (except actuarial and I refuse to wear a grey suit!) 

In that time I have seen the NHS opt-out scandal, the ETV epidemic and the Pensions Act, all major news stories and sources of commentary for many ex-advisers for years! (Though I was involved in close to £1bn of ETVs myself, all done carefully and ethically and with the FCA's "blessing")

But I have also seen a disappointing change in the way that DB pensions are viewed and I feel I want to share this disappointment with you the adviser. (why shouldn’t you share my disappointment) 

There are two polarised “camps” as I see it, those that see DB pensions as potential gravy trains for Adviser Fees and those that are petrified of them. 

There is a group that I see all too rarely though and this should be the only group in my personal opinion.

The adviser that sees DB pensions as an essential element of providing their clients with proper, holistic and relevant advice. 

Where are you? I know that you are out there! 

I have seen that the adviser that sees DB as a fee charging gravy train is all too obvious, their Client Agreements mention % of fund fees based upon transferring, even before any analysis has started (how does that work then?) all that does is make me assume that should the results of analysis be to retain then they are happy not getting paid! 

As I see it with my years of experience in this market from several angles, advisers should: 

  1. Never shy away from talking about DB as it is often a huge part of planned retirement income, you don’t need to be authorised for transfers to discuss them with your clients, after all if you don’t someone else could.
  2. If you are authorised, please, please, please charge a fee for your advice. Don’t rely on an adviser fee from within a transfer, if you charge for advice then you need not worry about the analysis outcome and you’ll be paid for your work. (Oh my goodness, did Niel just suggest I charge for pure advice....???)
  3. If your clients have large potential transfer values and won’t pay a fee you run the very high risk of going unpaid and I would argue that they don’t really value your advice in the right way.
  4. If you won’t get authorised you can select a suitably qualified and experienced adviser to do the analysis for you.
  5. Remember, that if you don’t look at these, not only could your client be missing out on valuable advice and potential benefits but are you really doing the job you set out to do for your clients?

Sure DB advice can be lengthy, dealing with DB scheme administrators is at times excruciating (some names instantly spring to mind) and the suitability reports can be onerous but it is often a vital part of your client’s total plans and I don’t think we should ignore them. After all if you were a surgeon doing a routine operation and you discovered a way more serious issue, you'd be ethically bound to at least bring it to the patient's attention (after you had sown them back up I imagine)

I am not suggesting that you all go out there and start looking to transfer DB schemes but I am suggesting you should start talking about them more when your client has one!

Think, if your vehicle mechanic changed your tyres, upgraded your brakes but didn’t bother to fix your engine, what use are new tyres and vented discs??

If you sell someone an ISA and move a small PPP to a SIPP but ignore 20 years in a DB scheme are you really adding much value to that client?

More importantly, you can demonstrate to that client that you really are worth the fee that you take and who knows, for that client that gets to retirement you may find that you are called upon to give them advice and in fact, really important advice too and that advice could lead to lots of lovely fees and just in case there's a Drawdown plan in there somewhere,  a really good long term income stream for you!

My suggestion here is then to start asking about them and start talking about them, find out what they have (many don't really understand how they work anyway!) be able to tell your client what their DB pension does and how it does it, you may stumble upon a client that really wants something different and that my friends is where you start to deliver advice!

You are all advisers after all right?

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