CompaniesApr 20 2015

Royal London apologises for advised client warning ‘error’

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Royal London apologises for advised client warning ‘error’

Royal London has apologised for an “error” in its ‘second line of defence’ pension warnings process, after it refused to send out application forms requested for an advised client and one staff member even suggested it may need to take the adviser through formal guidance.

FTAdviser was contacted by a financial adviser, who asked not to be named, after the provider sought to directly contact his client to offer additional risk warnings before releasing the cash held in his “very small” Royal London pension.

Having gone back to the insurer a second time to get application forms in line with FCA guidance that additional risk warnings are not required when the request is coming through an authorised intermediary, the provider still refused.

A staff member even suggested they could not process the request until they had gone through formal guidance with either the client or the adviser himself.

The adviser explained: “I have a client, with a signed client agreement, who has a very small pension with Royal London and wants to take it all in cash. I agreed that this is the right thing to do for the client and asked for the forms to process this.

“Royal London tried to contact my client, without my permission, to go through the risk warnings. As a qualified IFA and this being our client, this worries me.”

On the offer of guidance, the adviser added: “In other words, an unqualified admin person at Royal London wants to go through guidance with a qualified IFA before they will issue a form.”

Responding to FTAdviser enquiries, Royal London told FTAdviser the refusals had been an “error” on its part. A spokesperson added the forms have now been sent to the adviser and that the request will be fast-tracked.

Weeks ahead of the new pension reforms which came into force earlier this month, the regulator hastily introduced new rules without consultation to ensure providers institute a ‘second line of defence’ in the form of tailored risk warnings and signposting to guidance.

Warnings were to focus on tax consequences and health considerations through retirement. The rules made clear providers should offer the warnings even where a customer claims to have taken advice, but did need to do so where the request came through the adviser directly.

The FCA has previously stated firms should not seek to introduce unreasonable barriers to clients using the new freedoms. Royal London told FTAdviser its procedures are in line with FCA policy.

“Where we receive the contact direct from a customer (even where the customer informs us they have spoken with their financial adviser), it is the customer we communicate with to provide the relevant risk warnings.

“Where an adviser contacts RL to transact on behalf of a client they have advised, or we have evidence the policyholder has received risk warnings from a regulated adviser, we will communicate with that adviser.”

Old Mutual also told FTAdviser that it only delivers the ‘second line of defence’ to non-advised customers.

A spokesperson for Old Mutual said: “Advised customers do not require the ‘second line of defence’ information as they are receiving regulated financial advice on their retirement choices.

“The FCA states that the ‘second line of defence’ requirement is excluded where ‘an adviser contacts a firm to transact on behalf of a consumer they have given regulated advice to’.”

The second line of defence, which firms have had only since the end of February to produce, has been getting a workout in the early days of pension freedoms amid heavy call volumes to providers, according to firms’ early reports.

On the first working day after the reforms, of around 3,000 that called Zurich, one of several providers which previously told FTAdviser it would offer more strident warnings than required by the FCA, around 70 per cent were referred for personalised risk warnings.

donia.o’loughlin@ft.com