Pension adviser Zippen has launched a new switching service for wealth managers and advisers to help them service clients with smaller pension pots.
As a simplified advice service, Zippen said it can carry out switches for as little at £95, making it a more cost-effective approach.
Zippen said the service will be of “huge benefit” to the wealth manager market, who cannot market themselves as both an independent financial adviser and a simplified adviser.
Stuart Feast, founder and chairman of Zippen, says: “We are a simplified adviser which means that we can advise and transact on small pots which are commercially unviable for the IFA market.
“By the time an adviser or wealth manager has obtained all the relevant details, quotes and written a suitability report, there is often no commercial sense in dealing with such a case in the first place. However, it might be the small pot of an existing client or relative of a big client.”
Feast says the Financial Conduct Authority applies the same stringent rules on the viability of a pension switch whether the individual is switching £1,000 or £1 million and providing a full service can cost anywhere between £750 and £1,250, making it unprofitable for lower pension values.
“This creates a huge advice gap because if a standard IFA can’t offer a simplified service, what does a firm do in this instance?” Feast says. “Nobody likes to tell a client they can’t help, which often means clients heading for the execution-only door. At that stage, how can you be certain that you’re protecting a guaranteed annuity rate or other valuable benefit which would be lost on transfer?”
According to Zippen, most advisers recognise that pension values under the £75,000 – £100,000 mark will be non-cost effective, but they are unable to “put on a different hat and become a simplified adviser because it suits them.”
Feast adds: “For the record, a pension provider doesn’t have to consider any of these points. This will inevitably lead to poor consumer outcomes in the future as people will inevitably give up valuable benefits that they didn’t know they had.”
