Guidance Consultation – Check Client’s Understanding
Don’t forget the last step!
With all the changes taking place since the release of the FCA’s Policy Statement and Guidance Consultation on DB work, it seems very easy having gone through the quagmire that is now required to get a suitable advice to forget the last step.
A consultant said to me recently that there now appear four stages when DB advice potentially halts:
- Triage – thanks a lot did not realise it was like that and DB advice is not for me.
- Abridged Advice – retain, do not go pass go and consider Full DB Advice
- Full Advice – having analysed everything, including the TVAS, we advise you to retain your benefits.
And the last……
- Check The Client’s Understanding – having gone through possibly months of advice, do you fundamentally understand what is being proposed.
So the new rules require that when Defined Benefit advice is provided, that you must check with your client that they understand the advice that is being provided. That is before the advice is finalised.
How best to do this?
It is likely you will need to send the client a draft version of the report before it is officially issued – this will give the client the opportunity to go through and read what is being proposed.
Possibly a follow-up call to discuss the client’s thoughts on the situation. It is likely that another adviser or a member of the compliance team makes the contact.
What needs to be asked?
It is unlikely a prescriptive approach will meet the requirements and bespoke questioning based on the client and their circumstances, will need to be considered. Saying that though it is important you consider the client’s understanding of what they are giving up and what they will be getting in return:
- What do you understand of the risks associated with a transfer?
- If you transfer, can you explain the benefits you will lose?
- What do you think the proposed solution will offer you?
- How would you feel if the pension did not grow as expected?
The client’s responses will obviously need to recorded and should form the final part of the advice that is registered on the file.
As I said, like brushing your teeth twice a day, do not forget the last step….
