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Adviser Workshop: How to outsource DB pension transfer business

Adviser Workshop: How to outsource DB pension transfer business

Simon Webster (pictured above), Nicola Ellis and David Lloyd explain how they work with outsourced firms to offer clients the best solution when transferring their pension.

Simon Webster

Managing director, Facts & Figures

Consider what you want to outsource: transfer value analysis (TVAS) only, full report or full report and implementation of an underlying investment.

Ensure accountability

The regulation around facilitating and outsourcing is complicated. Make sure you know who is doing what and that the client knows who they are dealing with, who they are paying and what they are getting.

For outsourcing TVAS reports we made a decision on the suitability of the transfer and wrote our own business based on the reports and other considerations. We got the software to take the production of the reports in-house. We also brought in an extra member of staff and moved a member of staff to work on pension transfers.

Be clear with outsourcers

There are different ways of structuring the relationship with the outsourcer. You could say to a provider: ‘We will gather the information and you can ask us for any information that needs to come from the client, you produce the report and we present it.’ Or you could outsource the whole case and draw up a no cross-sale agreement.

We did not draw up a contract with the insurers [that do TVAS reports]. However, when outsourcing TVAS to a pension specialist advice firm there would be a no cross-sale agreement in place. This ensures they will not contact the client directly.

Nicola Ellis

Director, Wellington Wealth

We have only ever outsourced two pieces of pension transfer business as it is not part of our business focus.

But we have a minimum level of due diligence that has to be done on any prospective partner.

Do your research

We compile a list of companies that offer the service we need, and then check the authorisation, permissions and reputation of each.

We look at how long the company has been around, its staff turnover, and we ask for a copy of its client process and a copy of the paperwork to check its terms and conditions.

We make sure we know who is responsible and accountable for what parts of the business from the outset, and ensure the client understands the process before they engage the services. Contracts should be set up and the firm that is outsourcing to another should seek legal input if necessary.

Always add value

We are very clear with clients from the outset about the services we offer. We will tell them straight away that we do not deal with pension transfers.

We look for long-term client relationships where we can add value and if this is not the case we would refer them to someone who can help.

If the client has engaged us as their adviser and they still want to pursue a transfer we would make the introduction. But we would keep a close watch on the case using our internal expertise and knowledge on behalf of the client to ensure it is being dealt with to our satisfaction.

David Lloyd

Managing director, Lloyd & Co

We outsource pension transfers and the client is given a choice as to whether they want to be novated back to us afterwards.

Find the right partner

We have several businesses we outsource pension transfers to and have done due diligence on all of them. The first thing we ensure is a 50:50 split on fees, i.e. whatever fee it charges is split with the introducing firm.

But we also want the partner firm to be like-minded in terms of where investments will ultimately end up. It is difficult to find the right partner for this but it is important.

We make sure clients know they will be working with a different firm. At that stage they become the responsibility of the firm we have introduced them to, who then takes them through the process. We then have no further input until after the event.

I explain to clients that we are a very busy practice and it is a very specialist area so we are bringing a specialist in. They can come back to us after the transfer. They do not have to but in practice they do.

Know your strengths

We deliberately do not have the permissions for pension transfers because, as well as being a huge potential liability, our time is too valuable.

There are 17 people in our practice now and I have enough on my plate without putting time and effort into final salary transfers, when there are other businesses out there that specialise in it. To make sure the client gets the best outcome, it is best they deal with someone else.

THREE TOP TIPS

  • Simon Webster: Make sure you know who is carrying out each part of the process.
  • Nicola Ellis: Do thorough due diligence even if you refer very few pension transfers.
  • David Lloyd: Split fees and find a like-minded partner.

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