File reviews are not enough to safeguard firms against backlash from defined benefit (DB) transfers, Rory Percival has warned.
The former Financial Conduct Authority (FCA) technical specialist said even firms who review 100 per cent of their pension transfer files might not have the appropriate controls in place to shield them from potential risks.
The comments came as he launched a guide on defined benefit (DB) transfers, where he addresses this issue, alongside suitability and new regulations coming into force in October.
Mr Percival told FTAdviser a lot of financial adviser firms worked on the basis that they did checks on all their files but he warned "in isolation, this is unlikely to be an adequate control for this high-risk business".
He noted clients and advisers will be subject to certain biases they are not generally conscious of.
One of the ways around this problem, according to Mr Percival, was for firms to create a case panel – a small group of people that can review problem cases.
An ex-regulator’s guide to defined benefit transfers suitability and controls was the third guide authored by Mr Percival, who now runs his own consultancy firm.
On DB transfer suitability Mr Percival came up with a suitability flow-chart to help advisers reach a conclusion on whether their transfer advice is suitable or not.
He reassured advisers his views were "likely to be aligned with FCA thinking and expectations around suitability" considering that he was responsible for creating the regulator’s file review process back in the day.
Mr Percival also reiterated the need to explore a client’s objectives, priorities and their attitude to transfer risk, having warned about the need to tailor questions to the client in the past.
He said: "Getting adequate colour and detail about the client objectives is one of the key areas where firms aren't doing as well as they could do."
Ray Adams, director and chartered financial planner at Niche IFA, has read the guide.
He said: "This is an excellent guide, very comprehensive, but written in clear simple language with lots of helpful case studies, flow charts and appendices. Any firm which advises on DB transfers or refers cases out to specialist DB firms would probably benefit from reading this."
John Reynolds, chartered financial planner at Expert Pensions Consulting, agreed.
He said: "It signposts the direction of suitable travel for all advice business (not just DB). It shines a light through the dense fog regularly surrounding [the FCA]."
FTAdviser reported last week that Mr Percival is travelling across the UK until 8 November 2018, alongside Prudential experts, to deliver seminars for financial advisers.