"We’re particularly disappointed that the FCA guidance on a triage service continues to focus on what advisers “can’t do” within a pre-advice conversation."
The regulator raised concerns that some forms of triage were straying into the provision of personal recommendations, rather than generic information, highlighting that advice on a pension transfer can only result in one of two outcomes: to transfer or not to transfer.
In a policy statement, the FCA said: "We consider that any guidance based on a consideration of a customer’s circumstances which steers them one way or the other is likely to be advice on the merits of a transfer, and therefore pension transfer advice."
Its new rules also state that if an advisory firm provides its clients with the new Transfer Value Comparator during triage, then this is "likely to constitute pension transfer advice" as it will influence the customer’s decision to keep or give up safeguarded benefits.
The FCA admitted that repondents were 'disappointed' with its view of where the boundary lay and suggested that it was too narrow, raising concerns about what this would mean in practice for the ways in which firms carry out initial conversations.
There was "widespread concern" that advisers would no longer be able to prevent consumers from proceeding to full advice even where a transfer was unlikely to be suitable.
Most respondents said some degree of personalisation was "essential" in a triage service and that letting clients decide for themselves whether to proceed to advice was not a helpful outcome.
Advisers were also disappointed that unauthorised firms, such as occupational pension schemes and their trustees, can still provide members with a TVC.
Respondents made several suggestions about how a triage service could operate more effectively. These included forms of self-scoring or risk warnings that could help a client better understand how their own circumstances could affect any subsequent transfer advice.
Another suggestion was to introduce a form of streamlined advice (which could be provided at lower cost) for pension transfers where it was relatively clear from the start it was unlikely to be in the client’s best interests to transfer.
Finally, several respondents mentioned the increased significance of an effective triage service if the FCA bans contingent charging. They felt that if a client is obliged to pay for advice whatever the outcome, "it is essential that cases that are clearly unsuitable for a transfer should be filtered out at an early stage, to avoid unnecessary costs being incurred". In this case, some respondents suggested that it would be appropriate to make triage, or a referral to a guidance service, mandatory.
Despite the concerns, the FCA said it intends to proceed with its proposed perimeter guidance on triage, stating: "We are explaining where the boundary between advice and guidance lies - we are not moving it."
Steven Cameron, pensions director at Aegon, commented: “We’re particularly disappointed that the FCA guidance on a triage service continues to focus on what advisers “can’t do” within a pre-advice conversation. We’d hoped for a more “can do” focus under which advisers would be clear on how they could discuss which personal circumstances make a transfer more or less likely to be suitable without this being ‘advice’.
“Instead the FCA has added a further “can’t do” to their guidance. Advisers won’t be able to provide clients with the new standardised Transfer Value Comparator, showing the difference between the scheme transfer value and the cost of replacing these benefits with an annuity without this being deemed advice. This is despite scheme trustees being able to offer these.
“We appreciate that the FCA can’t change the Treasury-set boundary between guidance and advice. But with meaningful triage conversations looking extremely challenging without crossing the advice tripline, it’s even more important that the FCA helps firms understand how much can be included in generic material, whether that’s ‘ask yourself’ traffic light questionnaires or information videos.
“Advising on DB transfers is a complex and costly process and an effective form of triage would be hugely beneficial, stopping customers who shouldn’t transfer from incurring significant advice charges. It would also help advisers focus their limited resources on clients most likely to benefit from transferring. This is crucial as demand for advice far exceeds supply.”
