One of the first hints of a changing wind in client procurement came from Prudential’s 2017 Adviser Barometer report, which pointed to some surprising changes between in the previous 12 months on where potential clients find financial advisers.
In 2016 the report found two-thirds (68%) of new clients were referred to advisers from existing clients. In 2017, however, this figure had almost halved, dropping to just over one-third (37%).
The insurer’s report suggested the reason for this was that clients were coming to advisers through walk-ins and events organised in-house to present planning opportunities.
In 2016, the 101 advisers surveyed said no new clients came from client events, but this increased to an average of almost one-in-ten (8%) in 2017. Additionally, more clients came from other sources – such as walk-ins – increasing from 3% to 13% in the same timeframe.
When asked what could have caused the shift, Prudential head of business development Vince Smith-Hughes (pictured) said the most likely explanation was the increased demand to transfer out of DB pensions.
He pointed to previous research from the pension provider that found 81% of advisers reported an increase in requests for advice about transferring out of DB pensions over the past year. Taken together, he said, it could show transfers were having a “big impact”.
This trend was certainly familiar to Rowley Turton IFA Scott Gallacher. His firm saw a significant drop in clients from referrals – from 18% in 2016 to 4% in 2017. “If you’re just comparing 2016 to 2017, the fundamental change is DB transfers and, to some extent, Pensions Wise,” he said.
‘Proximity to DB site matters’
In contrast, Red Circle Financial Planning chartered IFA Darren Cooke said a quarter of his new clients this year had come from client referrals, which meant the proportion of new clients through referrals had gone up.
He agreed, however, the increase in client referrals through client events could be attributed to DB transfers, adding: “If you’re near a big DB site such as British Steel or Jaguar Land Rover where there’s a lot of transfer activities in some schemes – rightly or wrongly – then some advisers will be doing seminars or getting one client who will then pass on the knowledge, and then one client can quickly become more.”
For his part, Informed Choice managing director and IFA Martin Bamford said his firm’s new client inquiries had remained broadly similar to the usual spread in the last quarter.
He said two-fifths (41%) of new clients who came to the firm in the last quarter were from existing client referrals, one-quarter (23%) from online content marketing, a further quarter (23%) from the firm’s local presence and the remaining 13% from professional contacts.
While his firm had not seen a particular change, Bamford said a decline in referrals and a higher number of walk-in inquiries could be explained by changing consumer goals.
“From speaking to many advisers at the recent PFS Festival it was clear DB pension transfer inquiries are forming a huge number of current new client inquiries – in some cases acting as a salvation for firms that were previously struggling to attract business,” he said.
The FCA and DB transfers
In June, the FCA proposed changing advisers’ starting assumption that DB transfers were not suitable to the point where advisers would not have to start an analysis assuming the transfer was unsuitable.
In the same month, the regulator confirmed it was looking into certain firms that had increased the volume of DB transfer business undertaken. It said this was not part of a separate review but was ongoing supervisory work. A number of firms have subsequently agreed to suspend business while the reviews were carried out.
Then, in October, a report from the regulator announced fewer than half of DB transfers executed by firms since October 2015, where the recommendation was to transfer, were suitable.
In light of the extra demand for DB transfers and the FCA’s increasingly watchful eye, Prudential’s Smith-Hughes warned advisers to tread carefully.
“The regulator’s view is still very much that extreme caution is needed and the starting point should be not to transfer,” he said. “A lot of people are saying that has been weakened slightly, but in actual fact, I think it is very much the same. They are saying ‘proceed with caution’.”
The post Are DB transfers fundamentally changing how clients find advisers? appeared first on Retirement Planner.