FCA quizzing firms with high DB transfer conversion rates

In a letter sent to one adviser at the end of October, who preferred not to be named, the regulator said their firm's transfer conversion rate, which was above 50%, suggested it may "not be acting in line with the guidance on the approach to DB transfer in advice."

The FCA asked the adviser to identify and record the reasons for the high transfer rate and identify if there were any deficiencies in its approach to DB transfer advice.

The conversation rate relates to the percentage of positive recommendations given to transfer away from a DB pension.

In response to the letter, which was seen by Professional Adviser, the adviser said that, in the marketwide questionnaire on DB transfers they completed prior to the letter being sent, they were not given the opportunity to "explain the conversion rates or to count non-triage declined enquiries".

They said survey respondents were asked how many clients discussed a DB pension transfer with the firm but did not proceed to receiving advice. As the firm did not operate a formal triage service, it answered "nil" to that question, which they believed skewed the conversion rate.

The adviser said the firm offers a five minute chat with a client to give them a "no recommendation".

"We don't want the liability of giving any advice on these at all," they said. "Nor do I want to charge people for reviewing matters when it's clear that we'd say no anyway.

"It appears [the FCA] are unhappy with anyone who has what they consider a high number of positive recommendations."

This is "a misunderstanding of how the real world works," they said, adding: "I think the conclusions on conversion rates are incorrect because they don't take into account that, for most advisers, a DB transfer is a reactive service - you're advising people who want to transfer and the questionnaire didn't cover enquiries that didn't make it to any kind of triage service."

Instead, they said the FCA should be worried about firms with a high number of cases and a high conversation rate as that would be "more alarming."

The FCA has been contacted for comment.

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• Topics
• Regulation
• DB transfers
• FCA
• IFAs