Despite this, DB transfer work is too big an opportunity to overlook.

However with an industry-wide FCA investigation into DB transfer advice all planners will need to be able to justify their past and future advice in this area.

Since greater Pension Freedoms were introduced in 2015, helping pension savers get the most from their investments by advising on DB transfers has presented a huge opportunity for planners. The BSPS scandal has also highlighted that there is danger too.

The FCA is now training its lasers on those that advised on BSPS via a recent 'Dear CEO letter.' In the lead-up to this action it has been busy looking at the suitability of DB advice provided since 2015.

It has carried out four phases of thematic work; looking at 85 firms responsible for nearly half of the DB advice market.

The FCA felt that only 55% of the files reviewed were suitable, with the remaining 45% either unsuitable or holding insufficient evidence to justify the advice. For some, transferring out of a DB pension into a DC pension can be beneficial but the advice process and the rationale must be robust and evidenced by client advice files.

These actions, added to new regulations that aid trustees in blocking suspicious transfers plus individual accountability being far more prominent under the SMCR and the forthcoming introduction of 'consumer duty', makes an industry-wide review increasingly likely.

The FCA has ordered industry-wide reviews before, such as pension sales in the mid-1990s and pension switching in the mid-2000s. So wider action is not unheard of and planners should review all of their historic advice in DB transfers now.

While the FCA has published a tool for assessing suitability of DB transfer advice, it will be vital that planners avoid following a tick-box process.

A review has to be balanced. An overly commercial stance that does not consider the consumer outcome would be open to greater regulatory scrutiny, but a consumerist stance risks setting unwanted precedents such as underwriting present-day low interest rates.

Planners should have competent individuals and an effective quality assurance and compliance function to challenge senior management capability. This is needed as the starting point for regulators is that transferring out of DB schemes is not in the consumer’s best interests. With this position as a backdrop, advisers are under greater scrutiny to justify advice to customers to transfer away from a DB scheme.

One of the key tests will be whether the adviser has investigated if the consumer is reliant on the pension pot to fulfil their lifestyle after they have retired. However, if the consumer has alternative pensions or investments that will allow them to continue their current standard of living, or lifestyle into their retirement then it is easier to justify the transfer away from a DB pensions.

The fact is that the Financial Planner must be able to challenge each case on its individual circumstances. Financial Planners will need to sacrifice time and resource to carry out this work. It is not simply one rule that will apply to all cases. 

This approach requires a significant amount of work but planners that have given unsuitable advice now or in the past could be feeling the long arm of the FCA if they do not show willing to rectify the situation.

However, those that get their house in order and can prove a thorough evaluation of historic advice will retain the opportunities available in DB transfers and be able to thrive in this better regulated space.

David Robinson is regulatory director at Konexo, a legal and compliance consultancy and part of Eversheds Sutherland. He has over 20 years industry experience and is a qualified pension transfer specialist. Konexo provides advisory services, managed services, project support and interim resources to national and international clients. www.konexoglobal.com