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Pointers: Creating Suitability Reports for DB transfers

24 October 2016

In our third pointers article on DB pension transfers, we report on the discussion at the recent Powwow on how paraplanners construct Suitability Reports for these pensions transfers.

In the discussion lead by Benjamin Fabi, paraplanner with Jones Sheridan Financial Consulting, paraplanners said that on average their suitability reports for DB transfers were 30 to 40 pages long.

Most people used templates, with headings generally covering the following areas:
• Background and objectives
• Attitude to risk
• Research and analysis
• Recommendations
• Costs and charges
• What to do next.

Those headings, depending on the scope of the advice and recommendations, generally filled 15 to 20 pages.

Other delegates said they used standard paragraphs rather than a strict template when writing their reports.

Fabi said that he preferred not to use templates at all but to have free-flowing reports that start from clean sheet of paper “because then you are starting the paraplanning process from scratch.

“If you write the report from nothing that means you are thinking about it from nothing and that you are fully linking into the clients objectives,” he argued.

The challenge for Paraplanners, as ever with suitability reports, was what to put into the front of the report and what could go into the back. It was suggested that standard paragraphs on the Pension Protection Fund (PPF) need not be included as they are in the TVAs document “so there is no need for them to be repeated in the suitability report”.

In order to enable the client to fully engage with the advice and recommendations being made, it was suggested that everything a client has to read, such as information on the PPF and the Financial Services Compensation Scheme (FSCS), before they get to the facts that are personal to them was going to stop them wanting to read further. “Then they are in danger of not understanding what they need to.”

After the recommendation made to the client, Fabi said he includes a table in the suitability report under headings such as tax free cash; death benefits; security etc., which compares what the client will get if they stay with the scheme versus what they will get by transferring out.
“Then I will link this back to the client’s objectives.

For example: ‘Your objectives are that you want to retire early and the scheme will not allow you to do that without applying a penalty of x% per annum. This means you will receive an income of £x per year. By transferring you will be able to retire and receive an income of £x per year.’

In summing up the whole DB pension transfer process, Fabi said that if paraplanners “collect and analyse data properly and consistently, based on thorough processes, in a way that means something to the people who are looking at it, so that the client can understand and engage with it, then they will get the right decision for the client.”

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