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Conflict of Interest Policy

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Conflict of Interest policy in relation to safeguarded benefits.

Safeguarded benefits are defined as benefits that are not money purchase or cash balance benefits. This means defined benefits, guaranteed pensions including Guaranteed Minimum Pensions (GMPs) and Guaranteed Annuity Rights (GARs).

An individual with safeguarded benefits worth more than £30,000 under the scheme, must take financial advice before they can do any of the following:-

  • Convert these benefits into a different form of flexible benefits under the scheme
  • Transfer these benefits to another scheme to take flexible benefits
  • Take a cash lump sum in respect to these benefits

Not all schemes will offer all of the above options.

Pension Transfer Specialist (PTS)

Advice on the transfer or conversion of safeguarded benefits must be provided by, or checked by a PTS. This includes where the purpose of the transfer or conversions is to obtain immediate access to the pension savings. The advisers within Estate Capital Financial Management who have this qualification are Mr Christopher Davies and Mr Philip Johnson.

Appropriate pension transfer analysis (APTA)

An APTA is needed for all advice on all transfers and conversion of safeguarded benefits (except GARs) to flexible benefits, including where the client seeks immediate access to their pension savings. This includes transfers from defined contribution schemes, as well as from defined benefits to personal pension and stakeholder pension schemes.

The APTA includes a prescribed comparator (Transfer Value Comparator) which indicates the value of the benefits the consumer would be giving up.

Purchase of an annuity

The purchase of an annuity with safeguarded benefits is not considered to be a conversion. This means a client with a GAR can use these benefits to purchase a different shape of annuity without the need for advice where these benefits are worth more than £30,000.

Estate Capital Financial Management Limited will take all appropriate steps to identify, prevent and manage conflicts of interest by:

  1. Identifying and preventing any potential circumstances which may give rise to conflicts of interest, and which post a risk of damage to clients’ interest;
  2. Establishing and maintaining appropriate mechanisms and systems to manage those conflicts; and
  3. Maintaining systems at all times in an effort to prevent actual damage to clients’ interest through the identified conflicts.

This initiative is supported by all staff, who are committed to ensure that all conflicts between our firm and our clients, and between clients, are managed fairly with no party disadvantaged.

At least on an annual basis, our Senior Management team will receive a written report providing details of the kinds of services, or activities carried out by our firm in relation to “safeguarded benefits transfer”, in which a conflict of interest entailing a risk of damage to the interest of one or more client has arisen or, in the case of an ongoing service or activity, may arise.

In addition to complying with requirements, we recognise that handling conflicts fairly is a fundamental element of good business practice and is required to assist in maintaining and developing our firms’ business.

What is a conflict of interest?

Conflicts of Interest appear in situations where our firm:

  1. Is likely to make a financial gain, or avoid a financial loss, at the expense of a client;
  2. Has an interest in the outcome of a service provided to a client or of a transaction carried out on behalf of a client, which is distinct from the clients’ interest in that outcome;
  3. Has a financial or other incentive to favour the interest of another client or group of clients over the interests of a client;
  4. Carries on the same business as a client; or
  5. Receives or will receive from a person other than a client an inducement in relation to a service provided to the client, in the form of monies, goods or services, other than the standard fee for that service.

Conflicts of interest may therefore include but are not restricted to interests between;

  • Our firm and our clients
  • Our staff and our clients
  • Two or more different clients
  • Third parties and our clients
  • New services / products and our clients
  • Strategic changes and our clients

We have sought to identify and prevent conflicts of interest that exist in our business and have put in place measures we consider appropriate to the relevant conflict in an effort to prevent, monitor, manage and control the potential impact of those conflicts on our clients. The conflicts identified are:

  1. Connected clients
    We often work for connected parties, such as couple, family members and employers and employees. Normally, this doesn’t create an issue but sometimes, such as in the case of separation or divorce, this can create a conflict of interest if the advice to the two parties should be different.
  2. Inducements to staff
    Staff are not allowed to accept gifts, entertainment or any other inducement from any person which might benefit one client at the expense of others when conducting investment business.
    Similarly, our staff are not allowed to place undue pressure on clients to persuade them to trade through the firm to the extent that this gives rise to a conflict of interest between the client and another client
  3. Remuneration policy
    Remuneration is not dependent upon business performance. Relevant persons involved in the compliance function will not be involved in the performance of services or activities they monitor.
    A bonus system does not exist which is linked to business performance, team performance or the individual’s performance. This is at the discretion of the senior management and notified only on payment. In addition, we have implemented monitoring which includes reviewing of advice given to clients, the frequency of transactions and portfolio performance.

Contingent Charging Model

We recognise that contingent charging can result in cross-subsidies: the cost of advice for consumers who do not transfer is cross-subsidised by those who do transfer. In addition this may incentivise an adviser to recommend a transfer, as well as recommend products where ongoing advice charges can be deducted.

Estate Capital Financial Management Limited manages this potential conflict of interest by offering clients a number of ways to pay for advice. A recommendation to transfer will not be based on the clients’ choice of payment method.

Our Process

Clients will receive full analysis on the possible benefits or disadvantages of a potential transfer based on their circumstances, without any charges included and should this indicate that it is not in a clients’ interest to transfer benefits there will be no fee payable.

If however, the client circumstances are such that it could be in the clients interest, and a client then elects to pay for the advice via the product transfer, full charges will be incorporated into a new analysis, and the effects of this will be fully demonstrated and explained. All cases are reviewed by both PTS advisers before any recommendation is made

  • A “Third-eye” check is then carried out by the firm’s independent Compliance Consultant to ensure that the firm’s process has been followed, and that there is no client detriment.
  • We are satisfied that our advice process will eliminate those clients where a transfer of safeguarded benefits is NOT suitable and we will maintain a record of these cases internally.
  • Clients electing to pay for advice via a product transfer will be given full costs disclosure and the impact of these charges on the funds under discussion. Clients will be provided with a Suitability Report, APTA analysis and personalised illustration BEFORE they consent to proceed.
  • Estate Capital Financial Management Limited’s view is that it is imperative that any safeguarded benefits transferred to a personal arrangement are kept under review, as the initial advice is based on certain growth assumptions being achieved to match those of the safeguarded benefits. To this end, we will agree any ongoing service arrangements separately with a client and agree the cost of this service post transfer.
  • If for any reason a client declines to pay for / or cancels an ongoing service agreement we will ensure they are invested appropriately and write to them and explain the consequences of doing so but continue to offer an ad-hoc review at a cost to the client based on an hourly rate.
  1. Disclosure
    There may be occasions where we are not, in our opinion, reasonably confident that the risks of damage to the interest of clients will be prevented. Therefore, as a last resort, where there is no other means of preventing or managing a conflict, we will disclose clearly, in writing, sufficient details, taking into account the nature of the client, to enable the client to make an informed decision with respect to the service in the context of which the conflict of interest arises.
  2. Declining to act
    Where we consider we are not able to prevent or manage a conflict of interest in any other way, we may decline to act for the client.

Managing & disclosing conflicts

The measures for dealing with conflicts are designed to ensure that relevant persons engaged in different business activities involving a conflict of interest carry on those activities at a level of independence, appropriate to the size of the activities of the firm and to the risk of damage to the interests of clients.

Examples of procedures for managing conflicts include:

  • Effective procedures to prevent or control the exchange of information between relevant persons engaged in activities involving a risk of a conflict of interest where the exchange of that information may harm the interests of one or more clients;
  • Separate supervision of relevant persons, whose principle function involves advising on the transfer of safeguarded benefits, on behalf of, or providing services to, clients whose interests, may conflict, or who otherwise represent different interests that may conflict, including those of the firm.
  • Full disclosure of our firm’s interest in Nucleus Financial Services Limited is documented within our Client Agreement Document.
  • We also prevent or manage conflicts of interest by the establishment and maintenance of internal arrangements restricting the movement of information within the firm. This requires information held by a person in the course of carrying on one part of our business to be withheld from, or not to be used by, persons with or for whom we act in the course of carrying on another part of our business. Such an arrangement is referred to as a “Chinese Wall” and can include hierarchical separation and physical barriers between the activities likely to involve conflicts of interest, thereby aiming to prevent any undue transmission of information.
  • Where, despite the above procedures we identify a conflict of interest which may present risks of damage to the interests of a client, we will clearly disclose, in writing, to the general nature and/or sources of conflicts and the steps taken to mitigate those risks, to the client before undertaking business with the client.

This disclosure will take place as follows:

  • The individual who oversees compliance within our firm will be advised of the potential conflict of interest in writing;
  • We will advise our client in writing, of the potential conflict of interest and ask them to provide their written consent to proceed;
  • The client’s written consent along with the request will be passes to the individual who oversees compliance within our firm who can then provide approval to proceed as appropriate
  • Copies of both letter, together with the written authorisation to proceed will be retained on the client file

Review of conflicts of interest policy

This policy will be assessed and reviewed on at least an annual basis. Any necessary changes will be made within 28 working days of any review.