The Personal Finance Society has demanded greater protection for the public and advice profession stemming from the unintended consequences of pension reforms.
Speaking at yesterday’s PFS conference in London, chief executive Keith Richards said he discussed the growing issue of ‘insistent clients’ with the government and regulator as early as March this year.
Reports continue to come in that enquiries to access cash from defined benefit pension pots are increasing as anticipated and complaints from consumers who do not want advice but have not been able to find an adviser willing to simply satisfy the process, are also increasing.
The Financial Ombudsman Service recently confirmed that they had received more than 600 complaints from consumers who were unable to source an adviser, with one person claiming they had approached no less than 12 advisers who declined to be used as a facilitation service.
The PFS stated demand for facilitation of DB transfers is likely to grow steadily as people become increasingly aware of the option to access cash, but will need advice for pots over £30,000 to satisfy the new rules.
Scheme members must provide their trustees with a signed confirmation from a regulated pension adviser, including their Financial Conduct Authority registration number, which is then checked before the transfer is made.
Mr Richards commented that for the concept of pensions freedoms to operate freely and successfully in the way envisaged by the Treasury, “they and the regulators need to accept that not to facilitate an unsuitable insistent client transfer or annuity re-sale is an appropriate decision for an adviser to take, not least because it devalues advice in the first place, but the adviser will carry liability for the outcome forever”.
He continued that if the government and regulators expect advisers to facilitate transfers irrespective of their advice, then there must be a variation of process to provide certainty of liability/responsibility when a poor outcome subsequently materialises.
“To avoid some stated concerns that any change of process could see the process used by some advisers as a ‘papering exercise’, the PFS have proposed the introduction of an independent risk warning by the trustee,” said Mr Richards.
“The warning should include confirmation that the client has instructed a transfer against professional advice and therefore indemnifies the trustee, adviser and FSCS against any future complaint for compensation.”
He noted that every consumer should be protected by professional standards for which advisers also need to carry professional indemnity insurance and adhere to the FCA’s three stage process.
It should be the public’s right to make an informed decision, but they must also take responsibility for making a decision against professional advice, Mr Richards added.
He also re-iterated the PFS’ view that a ‘safe harbour’ principle is required to address growing public demand for focused advice.
“It is unreasonable and unrealistic to expect the sector to simplify the advice process without an appropriate alignment of regulatory impact, cost and risk.
“Hitherto, new entrants to the market have often tried to avoid regulatory advice, opting instead for non-regulated activities which afford inconsistency of standards and generally no protection for the client,” he said.
“Feedback from consumers has revealed they are concerned about the lack of access to advice and that the majority believe it to be expensive, complex and the preserve of the wealthy,” adding this was a misconception that needs to be rectified.
Referring to the Financial Advice Market Review, Mr Richards said he believes it should be possible – without increasing the risk or burden on advisers – to create a simple solution to meet the increasing public need for assistance with all aspects of their finances.
With the help of their members, the PFS has already developed a retirement options solution to simplify the process and quantify costs from outset. “We are also engaging with them to garner their views about the opportunity to expand it further, to consider how we can ensure good public protection with an appropriate level of adjusted regulation, liability and cost.”
peter.walker@ft.com
