LEBC Group has agreed with the FCA to stop advising on transfers out of defined benefit schemes, raising questions over adviser capacity to implement transfer exercises.
A statement from LEBC says it has agreed with the regulator to ‘voluntarily alter its permissions to provide advice on transfer or conversion of safeguarded benefits within a pension arrangement’.
LEBC has been one of the biggest DB transfer advice firms, implementing transfer advice at scale for large numbers of scheme members.
A statement from B.P. Marsh & Partners, which owns a 59.3 stake in LEBC, says advice in the DB transfer market represents around 20 per cent of LEBC’s total revenue in the current year.
It says ‘the cessation of the provision of advice in this area will have an impact on LEBC. However, LEBC, excluding DB transfer business, is expecting to produce annual revenue of c. £19m with the business still reporting an acceptable underlying profit position. As at the last published valuation (being 31 January 2019, released on 11 June 2019), the Group valued its 59.3 per cent stake in LEBC at £35.5m’.
Hyman Robertson head of member options Ryan Markham says the announcement introduces considerable uncertainty in the sector as LEBC’s exit will compound further the existing shortage of available DB transfer advice.
Markham says: “The news of LEBC’s withdrawal from the advice market will likely send shockwaves through the industry. The FCA has obviously started to adjust its focus to target the bigger players in the market and higher concentrations of risk. To have such a large provider of advice exit the market will undoubtedly introduce further uncertainty, and damage confidence in the market. There is already a shortage of quality advice and schemes may now have to scramble for resource to fill the gap left by LEBC. Financial advisers should take this opportunity to reassure trustees who will, understandably, become more cautious by demonstrating robustness in their advice approach and process. The FCA is rightly highly concerned about the volume of members leaving DB and we await to see whether other large scale firms could also be impacted by this review.”