How DB pension transfers impact retiring IFAs

In this instalment of our blog series, we’ll explore “How DB pension transfers impact retiring IFAs” a question taken from our recent YouTube video “What factors impact IFA Acquisitions?

One of the spotlights over the past few years in the industry had been defined benefit (DB) pension transfers and the political side of things is driving a lot of scrutiny from the regulator in the industry. With this being such a hot topic, it’s important to shed some light on what limitations there are for sellers and opportunities out there for buyers who are more open to engaging in taking a look at firms that have exposure to those.

Gary had some valuable insight on this saying “I’m pleased to say that just because somebody has DB pension transfers we are still able to help those individuals. Of course, it depends on the scale of the transfers. Before going into this further it’s important to preface this by saying; I’m an advocate of DB pension transfers, the building we’re sat in today and indeed the freehold of the entire business park was funded by a DB pension transfer so it’s right for some people. I think it really does depend on the number and the percentage of total and funds under management. That will lead us to decide whether somebody’s just going out there and marketing that DB transfers are for everyone, which they’re not. Yes, the FCA, as you’re rightly saying Alex, has this hot potato situation at the moment with DB transfers and so for acquirers that are not involved in the market they’re probably not going to want to acquire a business that has been involved with them and certainly not a share purchase which would take on the past liability. But, for many firms who do have DB pension transfer permissions, they would look at the vendor’s business and want to see what processes have been followed to make sure that they fit and align with their own due diligence standards used by their own compliance managers. If that’s the case, then there’s definitely an opportunity to sell those businesses but we’ve got to say that if there are multiple DB pension transfers it’s unlikely that a share purchase is going to be the way to sell it. If this is the case, it’s more likely that it will be more attractive on an asset purchase. My red lines for this are usually between five and ten percent of the total funds under management and again this doesn’t mean to say that a business above those figures is going to be ruled out, it just means that we really would want to have much more in-depth look at the transfers themselves”

Alex reiterated this by saying “That’s interesting context because, like you said, everyone will have their own different tolerance to it and it will depend on the makeup of the percentage of funds under management. But what we’ve seen as well is the buyer and their background to it where you’ve got the dare I say ‘newer wave consolidators’ that are perhaps more cautious. I think it’s fair to say in terms of their approach because they are on a buy and build strategy, they will take a slightly different view to it compared to a small or mid-sized firm making a strategic acquisition because they can perhaps evaluate the risks differently. Ultimately, they’re unlikely to be looking for an immediate exit as well so I suppose they will value that part of business and consider the risk in a slightly different way”


DB pension transfers are a really hot topic, especially when paired with growing regulation in the market, a topic we covered in our previous blog. Although this can seem daunting to some buyers and sellers, it is important to remember that there are so many fantastic opportunities in the market currently for both parties.

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