FCA pension transfer findings 'skewed'

FCA pension transfer findings 'skewed'

The Financial Conduct Authority's pension transfer findings may have been skewed by a few bad eggs, it has been suggested. 

Earlier today (December 6), the FCA published the findings of its recent work on pension transfer advice, claiming it was disappointed to find a mere 48.1 per cent of advice was deemed suitable.

As part of the assessment the regulator had reviewed 18 firms and 154 transfers.

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Whilst it recognised the results were based on targeted work and therefore not whole of market representative, the FCA said it was particularly concerned firms were still failing to give "consistently suitable" advice despite previous feedback to the sector.

The watchdog reported that following its assessments, two of the 18 firms had voluntarily ceased providing pension transfer advice and a further two had varied their business models and surrendered their pension transfer permissions.

Steven Cameron, pensions director at Aegon, said these four firms may have "skewed" the overall statistics.

He said: "While the headline statistics in the FCA’s latest publication on defined benefit transfer advice don’t make great reading, they are heavily skewed by the four firms who varied or surrendered permissions, where only one of 32 files was found suitable."

Andrew Boyt, independent consultant and pension transfer specialist, said: "I don't doubt there are some advisers who saw pension transfers as a dripping roast and threw themselves into the fray with the sole purpose of making some money - but these are the outliers.

"On a wider level with many of the others who were genuinely striving to do a good job, I think there is a conflict in the mindset of advisers between the highly individual nature of pensions transfer advice and the understanding of ‘treating customers fairly’.

"I think it's partly this which has led to issues around ‘industrialised’ or ‘battery farm’ advice which seems to have been prevalent in some of the firm's visited by FCA."

Benjamin Fabi, owner of outsourced paraplanning business Principled Paraplanning, said he found the results "really disappointing" especially as many advisers were committed to continually improving processes in the firms which they work with.

He said: "We need to wake up and realise the need to write relevant suitability reports that are clear and succinct."

In October, the FCA published new rules for pension transfer advice, setting out how advice should be provided to consumers on pension transfers where consumers are considering giving up safeguarded benefits.

Mr Fabi said all advisers should have thoroughly reviewed their processes against these new regulations.

He said: "There is a danger that some firms won’t have given this enough attention, concentrating on key issues such as the transfer value comparator without fully considering all the changes introduced.

"This doesn’t automatically lead to advice being unsuitable, but it won’t improve the FCA findings related to compliance of disclosure standards, which were very poor."