The pension transfer market has caused a stir over the last few years and it has made the professional indemnity (PI) insurance sector overly cautious, according to the co-chief executive of financial planning firm The Private Office.
This comes on the back of spiralling defined benefit (DB) pension transfer complaints, compounded by the UK Financial Ombudsman Service increasing its compensation limit to £350,000 ($458,167, € 409,007) from £150,000.
Smaller advice firms are likely to be badly stung as they approach ever-careful PI firms with their expensive premiums to get cover.
The Private Office’s Steve Phillips told International Adviser: “The final salary pension transfer market is a contentious one.
“The PI sector is nervous about the pension transfers issues and are only really allowing people to do it where it is deemed to be appropriate.
“It should be about regulated firms’ long-term strategic relationship with insurers and insurance brokers, so that the brokerage market understands the business and the process of what they do.”
Phillips believes this could make PI insurers more comfortable taking on the risk.
“I think lots of us have seen companies that don’t do things the right way,” and the advice firm boss says reaching out to the sector could help make insurers aware of the bad boys of the industry.
DB pension transfers troubles are not the only argument for change.
IA also reported last month that Mattioli Woods’ group managing director, Murray Smith, believes that the growing number of problem cases emerging in the self-invested personal pension (Sipp) market could be a “game changer” for the whole industry.
Positive red tape
Changing the financial services landscape on issues like DB pension transfers has to be done through regulation courtesy of the UK’s Financial Conduct Authority (FCA).
For Phillips, this is a positive and it could really help the sector to grow if carried out correctly.
“I am really excited about regulation, but I think it’s going to take companies and individuals to establish what a client actually needs not what industry has historically interpreted the FCA wants to see,” said Phillips. “If we can offer out to client a service that protects them and gives them certainty and outcome, I think that’s exciting thing in the market.
“Controls put forward don’t actually deliver better outcomes.
“Increasing the pages of risk warnings to clients is not what the regulator has said they are after, but is what the industry is moving towards.”
Growth
Phillips also spoke about his firm’s own growth in the sector after setting up 10 years ago.
In its first year, it turned over about £8m and, in 2018, it turned over around £11m.
The firm has some 20 people working in three offices across the UK in London, Leeds and Bath.
“Our intention, over the next six or seven years, is to grow the business to have an annual turnover in excess of £60m,” said Phillips. “We plan to grow predominantly with some strategic acquisitions.
“We have made some smallish acquisitions over the last two years and we have another one on the go at the moment.
“We probably will do one or two a year through that six-year period.”
Preventing a headache
TPO bought the London-based wealth management division of SRLV Accountants to expand its business into the capital in March.
But what is the acquisition strategy going forward?
“We are open minded. Midlands and north of the border is obvious for us,” Phillips added. “But I think at the moment, due to our strategic plan, we have acquired space in both Leeds and London that had the capacity to grow.
“Then once we are full then we will look strategically. At the moment with our three offices we can deal with clients in the UK.
“It would make it easier with more offices, but as you know, if you increase the number of offices, it becomes a management headache.”
