A year on, and I'm still worried about DB transfers

It's a year since I first wrote about Final Salary and Defined Benefit transfers.

Plenty of water has flowed under the bridge since then. However, there's still no doubt in my mind that the issue remains the single largest threat to our profession, as well as the finances of many thousands of people.

Over the past few months the events surrounding the British Steel pension are a microcosm of the wider issues.

We've seen a perfect storm of (understandably) worried consumers, a relatively short deadline to make decisions, and unregulated introducers, along with unscrupulous advisers, taking advantage of the situation.

Recent work by the FCA shows the potential damage left behind.

The regulator has reviewed 129 cases from 21 advisers and found 49% were either unsuitable or suitability could not be confirmed. Extrapolate those results to the circa 2,000 British Steel transfers and that's a huge potential liability which could fall on the FSCS (and consequently advisers), if those responsible can't cope with the financial implications of their poor advice.

News that the FSCS has increased their levy for life and pension advisers to £87 million, £12 million over the cap, shows that British Steel isn't an isolated problem. The increase is a result of continued SIPP mis-selling, which I would wager is at least partly linked to greater Final Salary and Defined Benefit transfer activity.


Assuming those offering poor advice don't experience an unprecedented Damascene conversion, significant changes are needed to effectively address this issue.

This must be driven from Canary Wharf.

There's no doubt that recently the FCA has stepped things up a gear in relation to British Steel. I just hope it's not too little, too late. Frank Field, Chairman of the Work & Pensions select committee was scathing about their response to the situation and I have huge sympathy with Field when he said: They must take care they are not sleepwalking into yet another huge mis-selling scandal.

However, more must be done. There are three things I'd like to see change sooner rather than later.

  • Double-checking

Firstly, I'm in favour of a mandatory double-check on all recommendations to transfer.

Currently, there is no requirement on a directly authorised firm to take external compliance input or have their advice reviewed. This means some will face significantly less scrutiny than their appointed representative counterparts.

As an aside this is standard practice at Beaufort and something which is welcomed by our advisers.

  • The FCA Register

Secondly, we need to make it easier for consumers to find the right adviser.

The British Steel debacle has highlighted serious issues with the FCA Register. Finding an appropriately qualified adviser on there is tough.

Furthermore, it isn't immediately clear that a firm has had their permissions restricted.

The register is set to change, with individual advisers set to be removed. This is a retrograde step and needs reviewing. It should be an important weapon in fighting scams, while helping to match consumers with the right adviser. Currently though, the user experience is poor and needs improving, not cutting back.

  • Cashflow modeling

Finally, Pension Freedoms has completely changed how retirees take their pension benefits.

A far greater emphasis is now placed on flexibility, moulding income to provide a certain lifestyle at different stages of retirement.

However, flexibility can only be achieved once the client (and the adviser) are confident that the essential expenditure can be met in the short, medium and long term, allowing for a variety of factors, most notably inflation.

The only way to achieve that is through rigorous cashflow modelling, testing different scenarios to asses the impact on a client's circumstances.

That's why we believe cashflow modelling should be mandatory for all Defined Benefit transfers. Without it, how can we be sure clients aren't leaving themselves significantly exposed during retirement?

Time for change

The situation at British Steel saw the best and worst of our profession. The issues of mis-selling and unregulated introducers were first highlighted by a small group of advisers, journalist and experts.

Without their intervention who knows what might have happened?

However, the evidence shows that British Steel isn't an isolated example. And, the recent events at Carillion demonstrate just how important it is that we all grasp this nettle now.

The problem with DFMs: Who is the client?

In my experience, an ever-greater number of advisers and planners are choosing to outsource investment management, allowing them to focus on what they do best; advise and plan.

Developing a Centralised Investment Proposition and outsourcing investment management to a Discretionary Fund Manager (DFM) is clearly one option that's becoming more popular:

  • Defaqto's Adviser Survey found earlier this year that among the advisers surveyed 72% of new business had gone to DFMs
  • A survey in 2016 by threesixty of 130 advisory firms found that 87% regularly use DFMs, up from 78% in the previous year

The threesixty research found that the most common reason for outsourcing investment work was to avoid risk and reduce liabilities.

However, I believe some advisers and planners are making a fundamental mistake, which could defeat those extremely sensible objectives.

The devil is in the detail

When I review the existing arrangements between advisory firms and discretionary managers I see two major issues.

Firstly, a lack of clarity in relation to the responsibilities and liabilities of both parties.

Secondly, clauses which automatically transfer responsibility for complaints about the underlying investment to the adviser or planner.

There's no firm guidance from the regulator relating to the relationship between DFMs and advisers or planners. It's therefore a case of relying on the agreement made between the two parties. Unfortunately, I've seen instances of some DFMs taking advantage of the advisory firm.

These agreements are regularly set up on an 'agent as client' basis, where the adviser or planner is treated as the client, not the end investor. In my view, this leaves the advisory firm exposed in the event of an investment-related complaint from the client.

Take for example this clause, which isn't untypical, from one DFM's contract: Any complaint received by us or the Platform Provider from a Client in respect of our discretionary management service via a Platform shall be referred to you. I'm not sure that most advisers and planners would see that clause as being consistent with their objectives of avoiding risk and reducing liabilities.

But I've never had a client complaint.

We've seen a decade long bull market. Even excluding the possible triggers of Brexit or the escalating situation in North Korea, we are likely to see markets correct, crash, or fall (select your preferred verb) at some point.

When it happens, we know some investors will choose that point to complain.

If your agreements with DFM partners aren't watertight it's you who will be on the hook. Not the DFM.

I'm not alone

There are others equally concerned as I am.

Only a couple of months ago the PFS said that advisers and planners (should) review their discretionary investment management agreements amid fears that thousands may be working with inadequate terms.

Keith Richards, Chief Executive of the PFS also said: "We have identified widespread confusion in the market on this issue. The lack of clarity around responsibilities where advisers and DIMs (Discretionary Investment Managers) are providing services to the same underlying client means many advisers believe the DIM is responsible for far more than they actually are, creating a potential 'suitability gap'."

It's clear that in trying to avoid risk and reduce liabilities, the agreements some advisers and planners have with their DFM partners results in precisely the opposite outcome.

The solution?

Review your existing arrangements and seek clarification or changes where necessary. Furthermore, question DFMs you plan to work with hard on responsibilities and liabilities of each party.

Be prepared to walk away too; as we've heard somewhere else this year; no deal is better than a bad deal!


Beaufort confirmed as a Top 100 financial services firm

For the fourth year running, Beaufort Group has been listed in The New Model Adviser's Top 100. This comprehensive list evaluates financial services firms on the basis of qualifications, recurring income levels, commitment to the profession and the qualities that set us apart from the rest.

For details of the Top 100 list, please visit: http://citywire.co.uk/new-model-adviser/news/top-100-2017-the-full-list-of-fantastic-firms/a1058553

In addition, Beaufort Group appears in the top 10 firms by assets under advice: http://citywire.co.uk/new-model-adviser/news/top-100-2017-the-biggest-firms-by-assets-under-advice/a1060587#i=6

Andrew Bennett, CEO of Beaufort Group said: We're so pleased to be recognised by New Model Adviser, yet again, for our commitment to delivering the highest quality financial advice in the most affordable, cost-effective and transparent way possible. We continue to provide the perfect blend of art and science, combining the art of nurturing client relationships with the science of identifying the best solutions to meet their financial needs, based on their goals and aspirations.

Investment management: delegation without abdication?

I recently read an article by Chris Gilchrist in Money Marketing.

I'm perfectly willing to concede a degree of confirmation bias is at play here, as many of Chris's views mirror my own. However, I thought it was an excellent article, which I'd highly recommend you read.

Chris explains his view that financial planners need to take investment more seriously: Even after a salutary dunking in the bear market, many advisers stayed on the same path. They regarded going to one or two fund manager roadshows as a sufficient basis for creating portfolios. I still come across people like this today.

Thankfully, in my experience at least, the days of advisers using a copy of Money Management, a ruler and a highlighter pen to make investment decisions have largely gone. However, there's no doubt that the disciplines of financial planning and investment management require different skill-sets, knowledge and experience.

Even for the purest planner, investment decisions will usually need to be taken during the advice and implementation stage of the financial planning process. That naturally leads to two options; manage investments in-house, or outsource to a third party, typically a Discretionary Fund Manager (DFM).

Let's look at both in more detail.


Most financial planners aren't experts in investment management. Nor is it possible to be a part-time investment manager and a full-time financial planner. If you are to successfully manage money in-house it's vital you invest in the resources and people, who are suitably qualified and experienced to take on the role.

The financial commitment isn't insignificant, which probably means your business will have to be of a certain size, with sufficient profitability to cover the additional expenditure, if you are to consider this option seriously.

When you start out on this road there are also practical challenges to overcome; you have no track record, buying power or potentially discretionary licence.

Time may overcome the first two.

However, the lack of a discretionary licence creates logistical issues around client consent and can create a heavy administrative burden. Of course, a discretionary licence could be sought; although that comes with additional regulatory and capital adequacy burdens.


The outsourcing of investment management to DFMs has gained traction over recent years.

Again though, this option isn't without its challenges. It certainly isn't a simple matter of delegation as I fear some advisers believe is the case.

I could write a far longer piece on the factors a planner should consider when selecting a DFM. However, in a quest for brevity I'll restrict myself to a few simple thoughts.

Firstly, the DFM must fit your business in every way. From culture and beliefs; they need to be used to working with planners and understand their role, to practical issues such as ensuring their investment options map easily to the outcomes of your risk assessment process. Of course, track record is important, but I do worry about the temptation to focus too heavily on the quantitative side of the equation and less on the qualitative.

Secondly, strategic terms. What will the DFM cost? And, what will the effect of their charges be on the total fees paid by the client? There's no doubt that the regulator, rightly so in my view, has got fees in their cross-hairs.

Thirdly, the relationship needs to be commercially viable for both parties, as well as your clients. And your business needs to be important to the DFM.

Finally, a watertight agreement between the DFM and the planner needs to be put in place. Among other things, it should cover the responsibilities of both parties, commercial terms and how they disconnect should it ever become necessary to do so.

What's right for your business?

Whichever option you choose, the result must free up your time. So, you can do what you do best; planning, leaving the experts to do theirs, investment management.

The decision-making process isn't straightforward. And while more planners are certainly outsourcing, they can delegate, but they can't abdicate responsibility.

Beaufort Securities

There have been a number of extremely negative trade press stories recently regarding an investment company called Beaufort Securities. Formerly a stockbroking business called Hoodless Brennan, Beaufort Securities has been censured by the Financial Conduct Authority on a number of occasions and is no longer trading as a Discretionary Fund Manager.

We would like to reassure our clients and professional partners that Beaufort Group has no association whatsoever with this company. Given the similarity of the name, we would recommend that you check the full company name of any emails you receive from any firm purporting to be Beaufort.

If you have any concerns or queries, please do contact us.

Change, or we die

Change is the law of life. And those who look only to the past or present are certain to miss the future. John F Kennedy.

I'm a great believer in the need to innovate and keep moving forward.That's often interpreted as harnessing the power of technology, and putting it at the heart of a business to deliver the products and services clients need in a more efficient way.

However, there's another area where, as a profession, we need to show greater innovation than ever before.

Although things are changing slowly, we are still a sector dominated by 'men of a certain age' (anecdotally in their 50s) looking for clients of a similar age (because they are the ones who have accumulated wealth).

That's three decades of people, both as clients and advisers, we are, partly at least, ignoring.

We can't carry on like this. Those businesses who change, adapt and innovate will be the ones who thrive. The others? They might survive for a while, but my prediction is that they will slowly die off.

I believe we need to show real innovation in two key areas:

1. Making financial advice more accessible

51% of the UK population is female, so why we continue to marginalise women is a mystery to me.

The recent 'Winning over Women' report highlighted a disconnection between female consumers and male advisers. The report concluded that:

  • Financial institutions have continuously overlooked the needs of female consumers at every stage of the customer journey; from advertising to the advice relationship
  • On average, men's retirement savings are three times greater than those of women
  • Only 38% of women feel 'in control of their financial future' compared to 51% of men
  • The value of investment portfolios held by women is 40% lower than those of their male peers. Furthermore, perhaps because of a lack of engagement, a significantly larger proportion is held in Cash

By 2020 almost half of all investable assets will be held by women. The benefits, from an ethical, social and commercial perspective, for advice firms who truly engage with the female audience are clear.

The need to make financial advice more accessible doesn't stop there though.

We must find ways of engaging with younger clients, who haven't yet built up large levels of investable assets. People in their 20s and 30s are our clients of tomorrow and are especially important for younger advisers who will outlive, often by some distance, their older clients.

That means harnessing technology, changing the way we charge and producing a slimmed down proposition, perfect for those people who, for now at least, have simpler needs. It also means changing how we communicate; what works with a 60 or 70-year-old, might not resonate with their grandchildren.

2. Attracting younger, as well as more female, advisers

If female consumers are overlooked by the financial services industry, it's little wonder that a large proportion of advisers are male.

It's slowly changing, but walk into any large room of advisers and it would be highly unusual to find a female majority.

If advising and planning businesses are to survive, we need to bring through the next generation who can take the reins in the future.

We must also find a way of making what we do more attractive to school leavers and university graduates. Wouldn't it be great if young people grew up wanting to be a financial planner?

For that to happen, we need to demonstrate we are truly a profession. That starts by moving the recruitment emphasis away from, how many clients can you bring. Do accountants and solicitors ask young recruits how many clients they can bring? No, I highly doubt they do.

That's why I'm so pleased that groups such as NextGen planners exist.

We are doing our bit too and we are on the lookout for ambitious advisers, who we can help to grow their business.

The old model of simply aggregating assets to sell on at some point in the future is slowly dying. The firms who will thrive are those who embrace change and innovate.


Your exits are here, here and here

As we head into the Autumn, the dulcet tones of the in-flight attendant may seem like a distant memory. But those oft-quoted words have got me thinking that, just like your clients, you will want to exit your business some day and perhaps enjoy more holidays in sunnier climes.

As you think of ways to exit your business, your thoughts will naturally turn toward a sale. Other options, such as a management buyout and internal succession planning are becoming more popular, but there's little doubt that a sale is more common.

That, of course, raises the $64,000 question: How can you maximise the value of your business?

The answer lies in understanding what motivates buyers and how they value advisory businesses. Our 'Dispelling the valuation myths' report, from March 2016, looked at this very question.

Survey findings

Among other things, the survey found:

  • The expectations of business owners, and the reality of the price they were offered, were often different
  • Tempting, but highly conditional offers, may well leave vendors disappointed in the longer term
  • Vendors will look to limit their liability to historical advice
  • The ability of the vendor to prove rigorous controls, advice processes and compliance, greatly enhances value
  • A strong brand enhances value, compared to a business which is essentially a home for a group of self-employed advisers

When valuing advisory businesses, profits were considered more important than recurring revenue

You can download the full report by clicking here.

On that last point, I can't help feeling that the move towards valuing a business in a more traditional way, as a multiple of net profit or EBITDA makes sense. After all, when did you last hear Peter Jones or Deborah Meaden value a business in any other way on Dragons' Den?

They don't and there's a good reason for that; turnover is vanity, profit is sanity.

What about your clients?

For many vendors, the success of their business is founded on the client service that they provide, which ensures that their clients remain with them over the years. Not surprisingly, our research found that vendors care greatly about the way their clients are serviced in the months and years following the completion of the sale.

Many of their clients will have become friends over the years, who they still want to be able to look in the eye after the sale, not have to cross the street from, because the acquirer shoe-horned them into an expensive and unsuitable investment proposition.

I'd go as far as to say that how clients are treated post sale, is as important as the sale price for most advisers.

What are you actually selling?

There are two things a vendor can sell:

  1. The equity of the business
  2. The goodwill of the business

A vendor will want to sell the former as it releases them, to a significant degree, from the contingent advice liability and will probably result in a lower rate of tax being paid.

Despite the movement of ongoing advice fees(from one entity to another), being more complex than a simple novation was in years gone by, the acquirer on the other hand, is likely to find the second option attractive. Not least because it absolves them of any liability for the previous advice.

So, here's our list of things you can do to improve the value of your business, make it attractive to an acquirer and, hopefully, agree a sale of the equity rather than the goodwill.

1. Manage risk

Take advice, subject higher risk business to pre-approval or double checking, think carefully about how an acquirer will use perceived risks in your business to drive down their offer.

2. Keep excellent records

Being able to easily answer an acquirer's questions will give them confidence, while aiding a smoother sale process.

The quality of your records may also be the difference between an equity and goodwill sale. After all, a complaint can't be defended without the relevant records. If you always have an eye on future due-diligence, you'll record the things that matter.

3. Future proof your business

Currently, some deals are done on a multiple of reccurring fees, others on a multiple of net profit or EBITDA.

Who knows what will happen in the future?

Future-proofing your business, so you are attractive to an acquirer, whatever method they use, makes common sense. Non-profitable, loss leader type business, bought in to bump up reccurring revenues, does not.

4. Build a brand

In days gone by, client ownership (as far as anyone can own or control another person) was all important. However, recent court cases demonstrate that adviser contracts, in terms of non-solicitation at least, aren't as valuable as once thought.

In multi-adviser practices, building a brand, which clients value and want to remain with post sale, is therefore crucial. Wherever possible the customer should buy into the business, not just the adviser.

We could (and will) write a whole blog on brand building, so watch this space in months to come.

5. Make the acquirer's life easy

The easier it is to complete the deal, the more attractive you will be to an acquirer.

That means, amongst other things, comprehensive records held on a recognised back-office system, as well as a limited number of platforms and investment propositions. Lack of well-managed, accessible data will seriously reduce value and restrict potential buyers.

If you have staff, who will move as part of the deal, their records should be equally accurate and up-to-date.

6. Your team

Think carefully about the role your team will play in the deal. The acquirer will be interested in one thing post-sale; how many clients stay after the sale. In fact, so will you, especially if part of the payment due to you is contingent on client retention. A smart buyer will see through any attempt to disguise a disgruntled employee as someone who has 'bought in' to the deal.

The support of the advisory and administrative teams is therefore vital.

Planning ahead

Every adviser will want something different from the sale of their business; but whatever it is, you have a better chance of achieving it if you plan carefully.

That means thinking about how an acquirer will view each and every decision you ever make in your business, starting now.

A game-changer if you work with solicitors

'Game-changer' is a cliche, I'd usually steer clear of using. Today though, I'll make an exception.

I'm referring to new rules, being introduced by The Solicitors Regulation Authority (SRA), which will change the way financial advisers and planners work with solicitors. If implemented they will have far-reaching consequences which those of you who work with solicitors need to prepare for.

Informal relationships

In my experience, most relationships between solicitors and advisers are relatively informal.

Introductions are often made from an individual solicitor to an individual adviser. It's common that in a multi-partner practice, each solicitor will introduce to advisers in different firms.

It's also true that despite the best of intentions at the outset, introducer agreements between advisers and solicitors often wither on the vine. That's often down to time pressures, but also, perhaps, because the arrangements aren't more formal; if they were, there's an argument to say they might be more successful.

That's one for another day though.

Back to the new rules, which will put an end to these 'every man for himself' deals. As SIFA put it in their excellent recent briefing note: This [the new rules] represents an important departure because it encourages solicitors to adopt a corporate mentality and to move away from the 'confederation of sole practitioners' syndrome which militates against the organisation of law firms on a commercial basis.

What's changing?

Firstly, the new rules, will mean that referrals between advisers and solicitors will need to be made under a formal introducer agreement. Consequently, a legal practice with multiple partners, each introducing to different advisers, will need several introducer agreements.

Secondly, the referring solicitor will need to have completed in-depth due diligence on each adviser the practice is introducing to.

Finally, the new rules may make it simpler for agreements to be arranged on commercial terms, with the solicitor receiving a fair level of remuneration for introductions he or she has made. More of that in another blog though.

For the time being, advisers and solicitors have time to prepare; the new rules aren't expected to come in to force until Autumn 2018. That doesn't mean you should waste time though, the implications for the relationships between solicitors and advisers are immense; you could call this a game-changer!


I welcome the news that relationships between advisers and solicitors are to be put onto a more formal footing. However, the obvious consequence is that solicitors, perhaps hard pressed for time and resources, will be unlikely to put multiple introducer agreements in place. In my view, there is a distinct possibility they will take a more centralised approach and agree to refer, at a practice level to one, maybe two advisers.

There's potentially a further implication too, which could be good news for independent advisers.

The Law Society makes a strong recommendation that solicitors should only refer their clients to advisers who can provide conflict free advice. With the additional due diligence that the new rules are likely to mean, could this lead to a situation where solicitors no longer refer to restricted advisers? Remember too, that solicitors have an obligation to refer clients to an adviser that the clients are in a position to make an informed decision that the referral will be in their best interests.

My advice?

I have no doubt that these rule changes will transform the way solicitors and advisers work together. If this is a market you are in I would therefore suggest you:

  • Start thinking about how the new rules will affect those relationships
  • Talk to your solicitor contacts and introducers now, most advisers won't know about these new rules, you now (if you didn't before) do. Explaining them through with your legal contacts, and starting to plan for their implementation, can only strengthen your position
  • Being proactive will also mean you are at the front of the queue if multi-partner firms look to take more centralised decisions and slim down the group of advisers they work with
  • Don't just talk to solicitors you are already working with. Why not use the new rules as a way of rekindling relationships which have, perhaps, grown a little tired? Or as a door opener to new firms?

We're here to help

Many of the advice firms we work with have thriving introducer agreements with solicitors; and we have many more in the pipeline.

We've all seen introducer arrangements started with the best of intentions only to fall by the wayside. We therefore invest heavily in finding new and building existing relationships, which of course must be worked at.

If you would like to chat about the new rules further (which I firmly believe, to go back to the original cliché, are a game-changer), or understand how we can help you build successful, profitable and enduring relationships with solicitors, please do get in touch. I'd love to introduce you to our Partnership manager, Richard Jephson, an industry renowned expert in these matters.

Andrew Bennett, Group CEO, Beaufort Group reinforces the case for a truly independent approach to financial planning

As one reflects on the immense changes the world of financial advice has seen against the back drop of a seemingly never ending era of ultra low interest rates, continuous changes in pension legislation and taxation, geopolitical upheaval and uncertainty, one consistent element remains. It is the compelling case for truly independent financial advice.

There is little doubt that regulation has led to advisers better educating and informing their clients. Our longstanding clients understand and trust us as we strive relentlessly to offer the highest standards of service. They recognise the difference between restricted and unrestricted advice. We take pride in our independent status as much as we do our professionalism and the high levels of qualification our people have - many hold Chartered Status. The clients pay for and deserve the best possible outcome and this means we will scour the whole of the market for it.

We have found that by avoiding the complications (and no little ambiguity!) of having to describe any restrictions on our recommendations, makes the whole process of advising and recommending that much more straightforward.

Our approach is always to assess our clients' needs on a case by case basis - starting with a blank sheet and few preconceived notions. It is not formulaic in any way. But what are the decisions that our clients are faced with and need our guidance? Just look at the way we live our lives now. Working beyond the retirement age, living longer, the social care cost time bomb and so on.

And here's the rub. There are so many more questions that financial advisers and planners are being asked about, not only by their clients but particularly the professional introducers, who view the modern breed of professionally qualified IFAs as their intellectual and professional peers. And the feeling is mutual. Much of our business comes from professional introducers, notably accountants and solicitors. Over the years we have built up excellent relationships and in making referrals, our introducers have to be certain that they are bringing their clients to a firm that is capable of providing the most suitable advice and the most appropriate solutions. This means our advisers (who are required to pass a series of annual tests), remain competent to advise clients who may have a number of legacy policies, assets and investments, often from providers that no longer exist.

Consider the value of a good mortgage broker today. One that will search the whole market for the best (and most appropriate) deal - rather than dash off to the high street lender that advertises the most attractive rate. Ask an insurance broker to shop around for a renewal quote. If you have read about the fabulous transfer values of a long forgotten company DB pension in the weekend papers, ask your IFA!

Maintaining independent status keeps our competitive edge and helps attract first class advisers to our partner firms. Imposing restrictions on advisers, particularly in the event of the sale of a firm to a restricted - orientated network or consolidator, is a sure fire way to lose staff and clients - and watch those assets under influence shrink. We know that restricted firms find themselves compromised when offering advice to clients who may wish to invest in niche products, be they ethical or socially responsible, for example. As genuine IFAs, we know we can provide the right advice and recommend a suitable product for every client, filtered appropriately to suit their needs, demands and objectives.


This article was originally published by New Model Adviser 3rd July 2017.

Why I'm getting more worried about Final Salary transfers

It was way back in February that I wrote my first blog. The subject was pension transfers (specifically Final Salary and Defined benefits schemes, to avoid any confusion) and I explained why the whole subject worried me.

Six months on, I'm increasingly concerned.

In that article, I identified four headwinds facing advisers:

  1. Insistent clients
  2. The press
  3. Managing client expectations
  4. Regulatory scrutiny

Currently, advisers trying their very best to do the right thing by their clients, and their business, are often stuck between sections of the media pushing the merits of Final Salary transfers and savers demanding access to their pensions.

Just look at the rise in Google searches for 'Final Salary pension transfer'. In July 2013 when Pension Freedom wasn't even a glint in George Osborne's eye, just 20 searches were carried out. Fast forward to 2017 and the number is over 1,000 per month.

Both of these can be addressed by advisers having suitable systems and controls. It's the increasing levels of regulatory scrutiny, no doubt triggered by the significant rise in Final Salary transfers, that's keeping me awake at night right now.

And I have no doubt that many of you feel the same as I do.

Regulatory scrutiny

There's little doubt the FCA is focusing on Final Salary transfers, so far this year we've seen:

  • The regulator publish its: 'Advising on Pension Transfers' consultation paper
  • Nine firms visited by the regulator
  • Several firms who offer an outsourced pension transfer service suspend (perhaps temporarily, perhaps not) their services and / or permissions

If any further evidence of the regulator's interest is required, you need look no further than this weekend's Financial Times. Megan Butler, the FCA's Head of Supervision, said: We've certainly seen enough that has given us reason to want to look more widely at this particular question and the issues that we are seeing with advice provided in this area.

I've got no problem with an increase in regulatory focus, if it helps to weed out the bad guys who undoubtedly exist. I do worry though about the effect on the good guys.

Allow me to explain

It's that time of year when the email alerting you to your latest regulatory bill will drop in to your inbox. The most contentious part is usually the FSCS levy. Partly because it usually rises year on year, but also that we all know the good guys pay for the misdemeanours of the bad guys.

As the questionable advice of the bad guys becomes increasingly evident, with a consequential rise in complaints (which, by the way, will surge if we happen to see a stock market correction and some consumers develop selective amnesia) the ever cash hungry FSCS will need more resources. Alright, let's call it what it is: Cash.

In the year to 1st March 2017, the FSCS paid out £105 million to 3,565 consumers, who each received unsuitable advice to transfer away from occupational schemes.

My fear is that's just the tip of the iceberg. How long can the good guys afford to pick up the tab for poor advice given by the bad guys?

The potential bigger risk though comes from PI insurers.

If regulatory scrutiny continues to rise (I have no doubt it will) and claims rates rise (I can't see them heading in any other direction) how will this affect the PI market?

Logically, premiums for those advisers with pension transfer permissions will rise; excesses will probably increase too. My fear is that things will get even tougher, with PI cover for pension transfers becoming harder, perhaps even impossible to source. If that's the case, where will it leave Pension Freedom and the statutory requirement for most to receive advice?

I know I'm taking a leap here, but part of my job is to identify potential risks and build solutions.

I hope I'm wrong

If you're one of the good guys I'm sure you are doing everything right and working with both the letter and spirit of the law. But regular sanity checks on your processes, keeping up to speed with latest developments and continued vigilance are no bad things.

If you're one of the bad guys, you're probably not reading this anyway; what I have to say to you really isn't printable! So, I'll move on quickly.

Time will tell where this story ends up; I truly hope my fears aren't realised and that once again the bad guys don't spoil it for the majority, who are doing the best to provide a secure retirement for their clients.

In the meantime, if you would like to find out how the Beaufort Group supports its Partners, to deliver the best possible outcomes for their clients, please do get in touch.

Which is best, network or direct authorisation? The definitive answer

There are certain topics which get our profession hot under the collar:

  • Active v passive
  • Displaying fees on websites
  • Network v direct authorisation debate

It's probably the last of those which raises more debate, emotion and subjectivity than any other. Being a chap who likes a challenge, I thought I'd have a go at addressing it.

Before I do though, I should lay my Beaufort cards on the table; I'd hate to be accused of bias. We are one of the few organisations who can be truly agnostic in this debate. We offer services to firms who wish to join us as appointed representatives or on a directly authorised basis. I believe that allows me to give a balanced view.

Whether to join a network, or seek direct authorisation, is the toughest decision that owners of advisory firms face. It should be approached with an open mind and only agreed after dispassionately weighing up the evidence. I'm afraid that all too often, emotion and subjectivity takes over.


Take to social media or any financial services forum and it won't be long before you find advisers suffering from a bad dose of 'confirmation bias', who are quick to berate networks. Often with little evidence, or using historical poor practice to damn the whole sector. I'll happily admit to feeling my blood pressure rise a few notches when I hear some of the common myths repeated without challenge.

I firmly believe that for many firms a network can be the right home, especially if the advisers, or team involved:

• Don't have the skills, time or desire to take on the CF10 role; the seriousness of which often gets underestimated

‚Ä¢ Don't have access to the required Capital Adequacy, or who, frankly, have better things to do with £20,000, or more

• Want to outsource certain tasks such as fee reconciliation, case checking, training & competence, and so on, allowing them to focus on what they do best; giving advice to their clients

• Need additional support growing their business

• Need, for whatever reason, the quickest route to authorisation

Direct authorisation

There's no doubt that for many firms, direct authorisation also has its advantages, especially if they:

• Are concerned that a network might be over-restrictive

• Have the ability, time and inclination to undertake the additional controlled functions (Discharged correctly, the CF10's duties are particularly onerous and not to be taken lightly)

• Can meet the regulator's capital adequacy requirements

• Have sufficient infrastructure to complete the tasks which may otherwise be undertaken by a network. For example, fee reconciliation, training & competence, research, financial promotions, case review, complaint handling etc

• Want to have more control over their business and potentially more flexibility; networks are bound to centralise many decisions

It's important to remember that the Conduct of Business rules are identical, irrespective of your authorisation status. The question therefore has to be how a directly authorised firm mirrors the services offered by a network, without which, it is impossible to run an advisory firm.

That brings me to costs.

Which is cheaper?

There's no doubt that direct authorisation can be cheaper. Especially if the business is run on a shoe string; obtain authorisation, pay for the cheapest Professional Indemnity Insurance you can find and decide not to buy in any compliance support. I've no doubt some businesses trade that way. In fact, I know they do. But it's dangerous, will impede growth and is potentially very risky for both them and their clients.

In my experience, network costs equate broadly to those of a well-run directly authorised firm (or, at least, they should), with the necessary resource allocated to successfully performing key functions. I therefore don't believe that the decision between network and direct authorisation should be taken based on cost.

The greater good of the business, and its clients, is of far more relevance.

Back to the original question

Which is best, direct authorisation or network?

The definitive answer is that there isn't one. In a world that increasingly demands binary, simplistic, answers, that's bound to disappoint some people. But it's just not possible to say that network or direct authorisation is always best. It really does depend on the needs of your business in the short, medium, and long-term, then matching these to the solutions available.

Whichever option you choose though:

• Read the contracts carefully

• Understand the options should you wish to leave (see my previous blog on 'Nine things to think about before you move network')

• Speak to existing and ex-members (both are great bellwethers for the state of the network)

• Undertake as much financial and regulatory due diligence as possible

Most importantly, whatever you decide to do, make sure that your decision is based solely on the needs of your business, its clients and the available evidence; not rumour, myth and conjecture

Nine things to think about before you move network

We all know there are two ways for your business to be authorised; directly to the FCA or via Appointed Representative status, usually through a network.

I'll save the direct authorisation v network debate for another day. Frankly, it can be a tedious discussion with no binary answers, only the right one for your business. That's why we are agnostic, offering both options to our partners.

But, following recent experiences, and an excellent piece in New Model Adviser, I do want to talk about the issues advisers and planners should think about before they move network. And offer a checklist of questions to consider before you hand in your notice.

You will be able to answer many of these questions by dusting off the contract you signed when you joined the network.

It may also be useful to talk to advisers who have recently left; they can easily be located on the FCA Register and will provide valuable insight into the practicalities of leaving.

1. What's your notice period?

Typically between one and three months, the notice period, and what happens after you hand it in, dictates the whole timetable of your move.

Make sure you check when that notice really kicks in. Is there a clause on file checking? Some advisers find that they can't leave until a certain number of file checks have been carried out. It isn't over-cynical to presume that those checks aren't a priority for a ceding network.

2. What happens to payments due to you?

Moving networks will almost certainly cause a period of disruption, potentially affecting your cashflow.

You need to understand what will happen to payments due to you after you've handed in your notice:

  • Will these continue to you as normal?
  • Will they cease until any potential clawback liability has been moved away?
  • Will payments stop completely?

Once you have the answers you can take appropriate action.

3. Will they allow bulk transfer / novation?

The days of being able to simply novate your existing clients, and the accompanying ongoing fees, are over. Life is now much more complex.

You need to understand the requirements of your existing network, your new home, the providers and, of course, the FCA.

If you have a potential clawback liability, relating to protection contracts, it's usual for your current network to ask for that to be novated to your new home, assuming they will accept it. An alternative would be for a sum of money to be left behind to cover future, potential, clawback. That's the reason some networks will cease payments to you on receiving your notice.

4. Will you continue to pay fees?

It's fair to assume you will continue to pay fees to your current network during your notice period.

But, will there be any other costs associated with leaving? Your current Network may want a contribution to your PI insurance for the year and possibly regulatory fees too, which are paid in arrears.

5. Will you need to buy 'run off' PI insurance?

Your PI insurance with your current network will cease when you leave. Both your existing, and new network, may therefore require run off PI insurance to be put in place to cover previous liabilities.

Of course, this may not be the case, but it's important to know what the situation is and any associated costs.

6. Will they allow access to data?

Over the years with your current network, you will have built up a significant amount of data on their back office system. This data is crucial to your business. For most advisers, the thought of building it from scratch is unthinkable.

You therefore need to know, as a minimum:

  • What access will you have to that data?
  • Will your current network allow a data transfer? If so, who will meet the costs and what are the regulatory requirements?
  • What happens to your paper files?

7. Are there any nasty non-solicitation clauses?

I've spoken with advisers who, after reading their current Appointed Representative and Registered Individual contracts, found nasty, and long-forgotten, non-solicitation clauses.

Ongoing access to your clients is fundamental to every adviser. Even if you think you know the answer, check your contract, just to make sure there are no surprises.

8. Will they allow a period of dual authorisation?

Most advisers fear a period of downtime when moving between networks.

It isn't always easy to arrange for deauthorisation and reauthorisation on the same day. The simplest way to avoid the possibility of downtime is to get both your current and new network to agree to a short period of dual authorisation.

9. What are their client communication requirements?

Your clients will need to be told about your change in network. However, it's important to know what the expectations and requirements of your current network are, along with those of your new network and the regulator.

Plenty more to think about

Of course, these questions are just half the story. There's a similar list relating to alternative networks before you make your final choice, but that's another blog, for another day.

In the meantime, I hope you found this useful, and, of course, if you are thinking of moving networks, feel free to contact me on 01959 567 000.


Why every adviser needs a compelling website

I'll happily admit to remembering the pre-internet age. I look back now and wonder how we ever survived without email, Google and the myriad of devices I use each day. But, in those non-digital times, how did advisers find new clients?

Usually word of mouth; recommendations and referrals from existing clients. Those advisers who were adept at getting referrals succeeded, those who didn't often left financial services to pursue a different career (or went to work in T&C!).

I've heard it said that advisers can still build a business based on recommendations and referrals. There's no doubt that's true, and that they are the best source of new clients. I can't help thinking though it's a little short sighted and that new, complementary, marketing techniques should be embraced with equal enthusiasm.

Indeed, I firmly believe that a referral and recommendations strategy is far more effective when used alongside other tactics; including a website. In fact, I've come to the view that every advisory firm should have a website, as part of a compelling online presence.


Quite simply because it compliments your other marketing. Let's take three examples:

Referrals and recommendations

There's little that boosts an adviser's confidence as a much as receiving a call from someone referred by an existing client. It's an opportunity to grow your business, as well as an endorsement from an existing client.

But, you don't know the clients you never had, because:

• They hit your website, were unimpressed and chose an alternative direction, or
• They tried to find you online, couldn't and looked elsewhere

That potential client was lost to you without your knowledge; your poor website or lack of online presence meant you never got the chance to work with them.

A compelling website compliments a referral and recommendation strategy. A potential client, referred to you, will probably do some basic online research before getting in touch. That means Googling your name, or that of your business. If what they see in the search results, and on your website, impresses them, the chance of them making contact increases. The reverse is true too, if the results disappoint, you may send them into the hands of a competitor.

Professional connections

A professional connection, who provides a steady stream of potential new clients, is the holy grail for most advisers.

I wrote last month about ways to engage with solicitors and accountants (you can read that blog by clicking here ), but one thing I didn't mention are websites. A professional connection will find it far easier to refer his or her clients to you if you have an impressive website.

Furthermore, many people referred to you by their solicitor and accountant will still want to do their own research. Your website needs to be as attractive to them, as it is to people referred by existing clients.


We all regularly get invites to seminars, workshops and webinars.

If the subject appeals to me I'll probably do some online research, including visiting the website of the firm putting on the event, before I commit to attending. This will equally apply to people you invite to seminars and workshops, especially if they have not previously worked with you.

If your website impresses them, they are more likely to book on; if not, they may head elsewhere, or simply delete your invitation without responding.

There's no doubt in my mind that those advisers and planners with an impressive website and compelling online presence, will be more successful in attracting new clients, than those who have neither.

If you've read my previous blog (they can be found here if you haven't) you will know I'm a big believer in putting my money where my mouth is. This holds true with websites. We provide all our partner firms with a website built to their requirements, to show off their business in the best possible light.

The cost to our partners? Nothing, that's how much we believe in the importance of websites.

9 practical tips to help you develop professional connections

If I asked 100 advisers for their ideal source of new clients, I would place a hefty bet that most would say recommendations from existing clients.

For many advisers that would be closely followed by recommendations from professional connections, by which of course I mean, accountants and solicitors.

A long-term and profitable relationship with an accountant or solicitor is the holy grail for many advisers. Yet I rarely see any which are productive over a prolonged period, with many quickly fizzling out.

We believe so strongly in the benefit of professional connections that we've recently recruited a new member to our team, Richard Jephson, and given him the remit to help our partners develop such relationships.

But, as the old proverb says: Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime, which is why Richard is spending much of his time teaching and coaching our partners to form profitable relationships.

It's in that spirit that I thought I'd share some of that knowledge with you. So, here are our top tips to forming profitable and enduring relationships with professional connections.

1. Build trust

You are asking solicitors and accountants to hand over to you the most precious of things; their clients. In so doing, they are putting their reputations on the line and therefore will only do so when they truly trust you.

And frankly, who can blame them? Without trust, the relationship will never succeed. As Stephen Covey (The 7 Habits of Highly Effective People) said: Trust is the glue of life. It's the most essential ingredient in effective communication. It's the foundational principle that holds all relationships.

Trust takes time to build. It means investing time in getting to know them, finding out how you can add value (see below) and delivering on your promises, every time.

2. Add value at every opportunity

You need to be seen as an expert, the 'go to person' for financial advice. That means adding value to the solicitor or accountant, and their clients, at every opportunity, and showing clear evidence that you are doing so.

Adding value builds trust and shows you are prepared to invest your precious time in the relationship; giving far more than you receive, at least in the early stages.

That means getting to know their needs and those of their clients, then thinking about ways you can help. For example, adding questions to your fact-finding process to enable work to be handed back to the solicitor or accountant. Equally, it could mean asking them to present at seminars you arrange or putting on workshops such as the CPD seminars we arrange for professional connections, to update them on, key issues and how these may present opportunities for them when they are sat in front of their clients.

3. Speak in their language

Professional connections need to know you understand them. There's no better way of doing that than speaking their language.

I once worked with a web designer who referred to an Individual Savings Account as a 'USA', I knew at that moment he didn't understand financial services. I looked elsewhere.

Don't make the same mistake with accountants and solicitors.

4. Understand how lawyers and accountants qualify

Understanding the process accountants and solicitors go through to qualify and maintain their CPD is important, especially if they are relatively recently qualified.

Taking the time to understand the relevant qualifications and professional bodies will show you've done your homework, are prepared to invest time in the relationship, and that you understand how they work.

At the same time, make damn sure they know how qualified you are. Explain the qualifications you hold and your annual CPD requirement. If appropriate, talk too about what you must do to attain your Chartered or Certified status and how it benefits your clients.

5. Understand how a practice works and how they market themselves

It's as important to get to know the professional connection's practice, as it is them as individuals.

Who are the key people you should get to know? What relationships have they had in the past with advisers? Did they work?

It's vital that you get answers to these, and other questions, if you are to make your relationship a success.

6. Know their rules

What can they, and can't they do? What limitations do their regulatory bodies place on them?

Study the SRA Code of Conduct; I can almost guarantee that very few advisers they have spoken to will have done this. By taking the time to do so, you will set yourself apart from other advisers, show you are prepared to invest in the relationship, whilst helping you talk their language.

7. Remember, you know your stuff

Never forget that you know more about financial advice than they do.

Sure, some accountants and solicitors might believe the reverse is true, but is isn't. That means your in-depth knowledge can help the connection and their clients far more than their limited knowledge can.

8. Be professionally assertive

Advisers need to take control and drive the relationship.

That might sound strange, but if you don't, in our experience the lawyer or accountant won't either.

Treading the fine line between being pushy, and professionally assertive, is an art; for the advisers who get it right, fruitful relationships are the reward.

9. Finally, the three Ps: patience, persistence & politeness

Rome wasn't built in a day and it will take professional connections time to trust you.

Be patient, yet persistent, keeping regular contact and reminding them you are there waiting to help them and their clients is essential.

Thank them personally for any introductions they give you. A personal card can go a long way. And where appropriate, keep them updated on work you are doing with their clients.

Newsletters and I saw this and thought of you emails, work well, as does utilising social media to acknowledge their updates, posts and shares.

You might feel nervous that you are pestering - don't. Providing you are adding value and improving their knowledge, your communication will be recognised as such.

There's no doubt in my mind that investing time and resources into building relationships; from introducer agreements to formal joint ventures, with professional connections, will help you build a stronger business.

That's why we've put our money where our mouth is and hired someone with just that remit.

If you would like to know more about our approach, please get in touch. Otherwise, I've always believed in practising what I preach; I hope this piece has added value to you!