IFAs Question the Merit of Trustees Using Preferred Advisors
Advisors hit back at the idea that administrators should work with preferred ICOs on retirement or a transfer request to avoid scams, saying it would exclude small businesses.
In response to the government consultation “Pension Scams: Empowering Trustees and Protecting Member Consultation,” which ended last week (June 10), a pension administrator said admins should work with preferred ACIs to avoid scams.
Girish Menezes, Chief Administration Officer at Premier Pensions Management, said: “A trustee could suggest a preferred ACI at the time of retirement or when requesting a transfer, as a specialist advisor can provide a quality education that can help the member understand whether or not they should consider a transfer. “
But Darren Cooke, certified financial planner at Red Circle Financial Planning, said if administrators provided an ACI, it would limit it to large companies because small businesses would not be able to cope with the work.
“There is not really much [independent] larger companies. The member may also have an existing relationship for many years with a trusted advisor, so they would still have the right to use that business, ”he said.
He said working with a preferred IFA would also require the trustees to do their due diligence on the business and could expose them to a claim if the notice later turned out to be inaccurate.
“I’m not sure that many projects want to expose themselves to it,” he said.
Tim Morris, IFA at Russell & Co Financial Advisers, agreed that a single preferred advisor for each trustee would not work.
He said: “A panel of advisers can be better. It works well enough for mortgage experts. “
In March, the Pensions Ombudsman explained how administrators should work with advisers, noting that there has been a reluctance among administrators to recommend financial advisers due to concerns about the scope of responsibilities and where the responsibility.
The mediator instructed the plan administrators to use market-wide IFAs and to exercise due diligence on them.
He told them to make it clear to their members that the pension plan administrator only facilitates access to advice, and does not recommend any particular course of action, that any legal relationship is only between the member and the member. ‘IFA, and that the pension plan administrator is not responsible for the advice of the IFA.
Under the latest rules proposed by the government, trustees will have the power to prevent pension transfers if there is a risk that the pension holder will be scammed.
Its proposals include a system of red and orange flags, warning trustees when pension holders wish to transfer their funds to another scheme that does not meet certain criteria, for example an employment link between the holder and the occupational scheme to which they wish to transfer.
Morris praised the initiative. He said: “Stopping a transfer sounds drastic and would cause all kinds of problems, but I wouldn’t take that option off the table.”