Ahead of the festive season, the Financial Conduct Authority (FCA) took steps to reinforce its commitment to cracking down on financial advisers providing unsuitable pensions advice by disclosing it had 50 open and ongoing investigations in this area.
The number is significant as it’s far more than the total number of investigations the FCA has completed in the past three years. While the FCA has already been seen in some quarters to have taken significant action against unsuitable pension advice, it looks like it will be further cracking down in the coming 12 months.
Announcing these open investigations, an FCA spokesperson said: “In the past three years we have completed 24 investigations relating to unsuitable pensions advice, taking either supervisory or enforcement action in approximately half of those cases.
“We are committed to taking action against firms that are found to be providing unsuitable advice, and also to ensure that where consumers lost out because of unsuitable advice that they receive compensation.”
Financial advisers in the firing line – but what do they think about the action?
Many financial advisers believe the FCA is particularly stepping up action against those who give out unsuitable pension transfer advice. Such a step would make sense given that the FCA is currently still investigating and is soon to set out its redress plan for those affected by the British Steel pension transfer scandal. Many savers were exposed to bad advice and thus lost vast sums of money.
One financial adviser, Dominic James Murray of Cameron James, told FT Adviser: “The increased investigation figures, may be as a result of the FCA taking a sharper view, of what they deem to be suitable or unsuitable.
“Even two years ago, what was deemed as suitable, would now possibly be deemed as unsuitable. We are increasingly declining a larger number of DB pension transfers each year, following the FCA and TPR guidelines.
“Initially, there was certainly not enough oversight in the DB pension transfer market, which led to a number of unsuitable transfers and litigations situations.
“Any client who was advised to transfer their final salary pension when it was not suitable, is one client too many. As such, we always support the FCA in the work they are doing.”
Meanwhile, Alistair Cunningham of Wingate Financial Planning said that enforcement action could now relate to historic advice. There are some fears that financial advisers could be deemed to have provided unsuitable advice looking at the situation as it is now, while the advice may have been relevant and suitable at the time.
Cunningham told FT Adviser: “I understand enforcement action is a long and complex process, and naturally it’s in the interests of the accused to throw significant resource even in the face of evidence, but my view is the FCA are frequently too slow or late to respond.
“Damage has been done, but that does not mean there is not value in trying to mitigate future damage and risk of harm. Enforcement action, and reducing occurrences of unsuitable pension advice is a journey, not a destination – I sincerely believe that.”
Pensionworks is among those who are happy with the work done by the FCA and is looking forward to further action in future. A spokesperson for the firm told FT Adviser: “These figures illustrate how important it is that, when working with a DB advice provider, trustees, referring advisers and clients, ensure they are comfortable that the advice firm fully embraces the regulator’s guidance whilst maintaining service levels that keep timescales and advice outcomes as an absolute focus.”
Finally, James Murray warned that increasingly stringent regulation and enforcement could see many legitimate and suitable transfers be frustrated. He told FT Adviser: “The majority of our clients are wealthy individuals, who have substantial assets outside their DB, and in many instances it makes complete sense for them to complete a transfer.
“However, they have to go through an extremely lengthy and costly process as they are treated as the same as the lowest common denominator of people who are trying to complete pension transfers when it is not suitable for them.
“The TPR and FCA has a job to do though, and we welcome their increased scrutiny of unsuitable transfers.”
Was your pension mis-sold? You could be entitled to compensation!
If you received unsuitable advice about a pension transfer or any pension product, and have lost money as a consequence, you could be entitled to compensation.
Contact LawPlus today for a free, no-obligation review of your pension advice and take the first steps to getting at least some of your money back.