We talk to Richard Hulbert, Insight Consultant (Wealth) at Defaqto to get his views on how advisers and paraplanners can improve their approach to pension switching in order to demonstrate that suitable advice has been given
Last year, pension switching came under increased scrutiny when the Financial Conduct Authority (FCA) found that less than half of the transfer recommendations which they had reviewed were suitable. Traditionally, when giving pension switching and consolidation advice to clients, a key challenge for advisers is that more often than not, one tool and system needs to be employed in the process to ensure that a suitable and compliant outcome is achieved for the client.
As the demand for advice on pension transfers continues to rise, so too does the regulatory scrutiny around them. Pension switching is a complex matter. To put this into perspective, the process advisers (and paraplanners) commonly follow when making a pension switch recommendation is as follows:
1. Fact find and data entry into CRM
2. Risk profiling and data entry into CRM
3. Consolidation of findings and data entry into a cashflow modeller
4. Fund research and data entry into a research tool
5. Product(s) and provider(s) research and data entry on a different research tool
6. Consolidation of research and findings via data entry into CRM
7. Production of suitability report(s) and copying into CRM
8. Transact business and data entry into CRM For many advisers, this process involves the rekeying of data into at least three different systems. This inefficiency can be costly to the business and increases the opportunity for errors.
A streamlined approach
To better navigate this, advisers should look to implement a solution which moves the process from being an arduous re-keying of data across different systems to one compliant, straight-through process that can be completed within minutes rather than hours. As the demands and pressures on advisers continue to evolve so too does the technology available to them. More advanced financial planning tools, now allow advisers and paraplanners the scope to review their client’s existing pension arrangements within one system that covers all of their financial planning needs.
The right financial planning technology should introduce seamless research, platform, product and fund selection. With this functionality, advisers can compliantly assess if a client should switch out of their current defined contribution (DC) pension scheme or stay where they are.
Technology can go a long way to support an adviser’s current advice process. A truly end-to-end financial planning tool will offer a variety of workflows, tailored to meet the needs of specific groups of clients.
Looking specifically at pension switching, advisers should look for a solution that equips them with a compliant workflow, inclusive of robust research and an FCA-approved reporting capability.
With the right technology solution, advisers will not only create time efficiencies and cost savings but they’ll also be able to standardise processes with an automated audit trail evidencing that due diligence has been performed and that suitable advice has been given to the client.
About Richard Hulbert
As an Insight Consultant (Wealth) at Defaqto, Richard covers retail financial products and their distribution, notably investment bonds, platforms and pensions, including autoenrolment and at-retirement options.
His key responsibilities include reviewing, developing and producing financial research, the Defaqto Star Ratings and bespoke case studies for providers and intermediaries – much of which is CPD-accredited to support financial advisers’ professional development
