Treasury told of possible mis-selling post-freedoms
HM Treasury has been holding private meetings with senior figures in the financial world, as problems over insistent clients and availability of advice have arisen just weeks after pension freedoms came into force.
In one recent meeting, Treasury representatives were warned that dealing with insistent clients posed the risk of a future mis-selling scandal for product providers as well as advisers.
David Hughes, managing director of provider Jessop Fund Managers, confirmed he had used a meeting with the Treasury in part to raise concerns over insistent clients.
He said providers have their own problems with clients who are “insisting they do not need advice and want to use advice-only products directly.
“From a provider’s point of view we are all really nervous of a future mis-selling scandal. We do not want to go down the non-advised route.”
He said one solution could be for the FCA to broaden its perspective on insistent clients, adding: “It is not just with advisers but providers as well”.
In the wake of the pension reforms there has been much debate about how advisers should deal with insistent clients.
On 8 June the FCA published a three-page factsheet, Pension Reforms and Insistent Clients, where the regulator outlined three key steps for advisers dealing with such clients.
The FCA said advisers must provide advice that is suitable for the client and make sure this advice is clear. The FCA also said advisers should make it clear to the client that should they reject the advice given then any actions they take would be seen as going counter to the advice given.
Finally, the FCA suggested that an adviser should make all the risks of the alternative courses of action absolutely clear to the client.
Keith Richards, chief executive of the PFS, first highlighted the potential problems of insistent clients back in May, shortly after the freedoms came in.
He said: “The public needs protecting from known risks and unintended consequences as far as possible and the proposals we have made should ensure that is the case.
“At the same time, advisers and the profession at large need assurances that they will not be carrying liability for insistent poor decisions and that any subsequent thematic reviews will not hold them to account if a trend of consumers’ funds becoming exhausted materialises.”
However, Neil Walking, a consultant for financial regulation specialist Bovill, has told IFAs not to “become paranoid about dealing with insistent clients on DB transfers” but to request a client letter explaining their decision.
There have also been concerns at the Treasury over pension fund charges. On 17 June, chancellor George Osborne announced to the House of Commons that the government was investigating companies not offering full pension freedoms and was considering a cap on charges.
Right to reply
The FCA declined to comment on whether it would broaden its perspective on insistent clients to providers.
A spokesman for HM Treasury said: “Nearly three months into our reforms, it is good to see many pension companies offering their customers flexibility and we will continue to work closely with industry and regulators to make sure people can access their money in ways that work for them.”
Email: david.baxter@ft.com
