The new regulatory requirement for advisers to produce negative suitability reports is fuelling complaints from clients, an Oxfordshire-based IFA has claimed.
David Batchelor, chartered financial planner at Wills and Trusts, who was in the audience at Westminster Business Forum conference today (December 11) in London, told an FCA representative that he believes two complaints he received wouldn't have happened if the firm didn't have to produce a report explaining why the clients shouldn't transfer out of their defined benefit (DB) scheme.
The requirement for advisers to produce a suitability report for all advice came into force in October, after the Financial Conduct Authority (FCA) concluded that consumers should have "a record of the reasons why remaining in a safeguarded benefits scheme is the most suitable outcome for them."
Mr Batchelor told FTAdviser that one of these complaints is now at the Financial Ombudsman Service (Fos).
He said: "The client wanted to transfer out and manage the investments themselves, and we wouldn't recommend that because they didn't have any investment experience.
"Prior to the FCA guidance on the negative suitability reports, probably we would only have a conversation with them, saying that if we did a report it would cost £700 and the recommendation would be not to do the transfer.
"Now we are in this obligation that we need to give them this report, we have to charge you to tell you what we think, and you are not going to like it."
Mr Batchelor added that all charges were refunded to the client, as the firm has a money back guarantee if the client is unhappy with the advice.
He added: "We are in a situation where we have been pinned to a corner, because the moment it becomes advice we need to provide a suitability report, and we can't do one without charging them.
"We need to charge them money to tell them what they don't want to know.
"I understand where the FCA is coming from on this, but I think there needs to be a layer of common sense over the top of it."
Pritheeva Rasaratnam, head of pensions, insurance and retail distribution at the FCA, said the regulator considers that negative advice and advice not to transfer "is just as valuable as advice to transfer".
She said: "Some consumers don't feel that way, but as you say you were acting in their best interest, and we think that is valuable advice which is worth paying for."