The Personal Finance Society has warned that the government and Financial Conduct Authority run the risk of creating a future mis-selling scandal that will bring future claims on advisers if they do not address the issue of ‘insistent clients’ acting against professional advice.
The PFS has written to both the government and the FCA, stating that they must deal with this issue and should change the policy for those clients that ignore advice.
After next week, it will be mandatory for those with defined benefit pension pots to get regulated advice if they wish to transfer, unless the pot is less than £30,000. However the PFS remains concerned clients can ignore whatever advice they are given.
Keith Richards, the industry body’s chief executive, said: “The government are sensibly seeking to mitigate the risk of poor outcomes by ensuring that people take impartial professional advice when wishing to transfer out of a defined benefit pension scheme or effect an annuity resale.
“However, where the advice is not to transfer, the government have confirmed that people will still be at liberty to ignore it.
He added that this places advisers in a compromised position, as many will not be prepared to facilitate an insistent client transaction which goes against their professional advice.
“Those who do will be party to arranging an unsuitable solution and might be deemed liable in the event of a complaint.”
Advisers have frequently pointed to a growth in demand ahead of the new reforms, but many have also expressed concern over the likely spate of DB transfers, advice for which needs to be overseen by a pension transfer specialist with an AF3 qualification or equivalent.
According to data published by Prudential earlier this month, around a third of those who have a DB pension and are retiring this year could seek to transfer their pension under new pension freedoms coming in from 6 April.
Mr Richards said he wanted it made clear that ignoring professional advice must exclude any form of future redress against the adviser or the Financial Services Compensation Scheme.
“If the government want advisers to help implement greater consumer choice, we are calling for an urgent change of policy in recognition of the risks this represents to both the public and the future reputation of the advice profession,” he stated.
“Caveat emptor must become a recognised component of the insistent client process. Until that happens, advisers should not get involved in unsuitable facilitation without being protected. It benefits neither them, the profession, nor the public we are here to serve.”
During FTAdviser’s two retirement freedom events last month, advisers questioned the FCA on retrospective regulation and ombudsman claims which they feared might arise from advice given now in relation to pension freedoms.
Maggie Craig, head of policy for savings, investments and distribution, said advisers should exercise “judgement” on a case-by-case basis when deciding whether to walk away from contentious cases or insistent clients.