Adviser trade body the Association of Professional Financial Advisers has joined calls for greater clarity from the financial services regulator to protect advisers against future claims from clients transferring from pensions with guaranteed benefits under new pension freedoms.
The Association of Professional Financial Advisers’s request came as part of their response to the regulator’s consultation on proposed changes to pension transfer rules and comes in the wake of a high-profile intervention from the Personal Finance Society on ‘insistent clients’.
Apfa said it backed new FCA rules which will require advice to be taken before any transfer is undertaken from a defined benefit scheme, or defined contribution scheme with guaranteed rates attached, but only if confidence can be given to advisers on future liabilities.
The proposals make advice mandatory and require oversight by a qualified pension transfer specialist for final salary members, unless combined benefit rights are less than £30,000.
“The FCA should make it clear that no liability would attach to advice which, although the recommendation might be against a DB to occupational DC transfer, acts as ‘enabling’ advice regardless,” the body’s director-general Chris Hannat said.
Responding to adviser concerns that to avoid claims from anyone defying recommendation they will need to abandon the client, a spokesperson for the FCA told FTAdviser last week advisers need to keep “clear records” of both their recommendation and the client decision.
Both the FCA and the Financial Ombudsman Service, which is at the centre of concerns as it is not obliged to rule on the basis of compliance with regulations at the time, said they thought future claims were unlikely if processes were documented, but they could not offer guarantees.
Mr Hannat demanded clarity on where and how liability would attach for advice to ‘insistent clients’, who want to go ahead with a transfer against advice.
“While we are confident that the advice industry will continue to rise to the challenges set in motion by the government’s pension reforms, investment in the retirement advice space is unlikely to happen without greater FCA clarity on the liability implications of the new pension transfer rules.
“This could potentially restrict consumer access to professional advice at a time when they need it more than ever.”
At the end of last month, the PFS warned the government and regulator that they are risking a future mis-selling scandal and claims against IFAs if they do not address the issue of ‘insistent clients’ acting against professional advice.
The PFS has written to both parties and has said it is pushing for guarantees over future claims. It has also told advisers processing insistent business could undermine the value of advice.
Keith Richards, chief executive, said: “If the government expect advisers to facilitate transfers, irrespective of their advice to the contrary, there must be a change of process to further protect the client and guarantee that advisers will not be held liable if a poor outcome subsequently materialises.