The defined benefit (DB) pension transfer market has become a challenging space, but one financial advice firm can see the benefit of keeping its permissions.
International Adviser spoke to Adam Benskin, chief executive of Strabens Hall, who said that the firm believes in the “short-term opportunities” of the DB transfer industry.
“We’ve been very fortunate in the sense that our professional indemnity (PI) insurers look at our files and look at how we do the work in that market, it’s very high on their radar,” said Benskin. “They’re very comfortable with what we’re doing and so it hasn’t had an impact our ability to get PI cover or problems with our premiums.
“I don’t think we’re the only firm in the market at this stage. There’s a window of time when people will still be thinking about transferring out.
“But if we see rising interest rates in future, and the reality is that a transfer is something that happens only once, and a lot of people have already transferred out, the demand will fall.
“I think it’s more of a short-term opportunity rather than something that’s going to be a part of our business for many years.”
Regulation clampdown
This comes at a time where many advice firms are leaving the DB market, as the Financial Conduct Authority (FCA) introduced measures to reduce the risks involved with pension transfers after the British Steel Pension Scheme scandal.
In June, the UK financial watchdog issued a range of measures designed to address weaknesses across the DB pension transfer market, including banning contingent charging,
In September, IA reported that 193 firms had given up the permissions required to advise on DB pension transfers since the announcement of the contingent charging ban.
Many firms have been put off from being in the space due to the rise of PI insurance premiums.
Strategy
But despite the negativity around the DB market, Strabens Hall has a plan to remain in the space.
Benskin said: “We’ve subscribed to the gold standard that the Personal Finance Society has set and the thresholds for the type of people that we’re willing to engage with as clients in that market.
“So as a minimum, you have to sign yourself off as a high net worth individual.
“For clients who do not have to rely solely on a pension income in retirement, it’s a great opportunity to think about transferring out of a defined benefit scheme now because with interest rates at such low levels, transfer values are at all-time highs.
“I know the FCA says all transfers are unsuitable, but for example if you’re worth £30m ($38.9m, €33.1m) and you’ve got a £2m pension fund, and I think the conversation is slightly different.”
