In a week fraught with global protests, Covid-19 uncertainty and warnings over pain to come as Brexit approaches, the Financial Conduct Authority has added its own special sauce.
Accompanying its policy statement on defined benefits, and the generally welcome ban on contingent charging (with exemptions for certain consumers), the FCA issued a consumer guide.
This was aimed to help clients reassess the quality of the advice on defined benefit transfers they have had over the past five years.
It signalled a list of “alarm bells” that could point to unsuitable advice, and the regulator urged consumers with a potentially viable claim to get in touch with the advice company in question or, failing this, refer their complaint to the Financial Ombudsman Service or Financial Services Compensation Scheme.
As senior reporter Rachel Mortimer stated: “Included in the regulator’s list of red flags were instances where an adviser recommended in writing against a transfer, but hinted that a client should go ahead and leave a DB pension anyway.
“The FCA said consumers might also have a valid complaint if their adviser did not ask for further information regarding their own or their family’s income, spending, tax position, pensions or debts.”
Consumers were also encouraged to check the standard of their advice if they are now in a pension scheme, recommended by an adviser, with funds invested in hotels or student accommodation, storage pods, leisure developments, parking schemes, forestry, precious metals or other unusual investments.
Claims management companies must be rubbing their hands in Scroogian glee at the thought of such “state-sanctioned” complaints action.
Nobody in the financial world would deny a consumer either their right to complain or their right to compensation if it is found that advice has been lacking, inappropriate or downright wrong.
Few advisers would ever recommend clients give up their gold-plated DB pensions with protected rights in order to stick their wealth into a self-invested personal pension simply to take advantage of storage pods in Nebraska or Costa Rican teak plantations.
Even fewer would actively scam clients out of their pension wealth, although as our story on page nine has revealed, a further £5m has been lost to scammers in recent weeks.
But for every 10 instances of great advice being given, there will be one client that goes against that advice and does something ridiculous.
Back in 2014 (can it really be six years ago?), Financial Adviser reported on the case of an adviser who helped a woman carry out an equity release on her home as she wanted to have easily accessible money.
A few months later she had gone with another, unregulated adviser, and stuck that money into Bulgarian buy-to-let.
Within the year, the ombudsman was knocking at the original equity release adviser’s door, blaming him for not checking what she intended to do with her money. The case was, of course, more nuanced than that, but it provided a salutary lesson.
With the FCA urging clients to check their advice, the regulator by implication — whether intended or not — is suggesting to all DB transfer clients that there is something to check, that something might not be right.
That fosters further distrust in the industry and it won’t be long before complaints start pouring in, whether or not they are with merit, professional indemnity insurance premiums rise again, and once more the regulatory levies rise to accommodate this increase in queries regarding DB pension advice.
Nobody needs a crystal ball to see this train coming round the corner. In fact, as FTAdviser reported last week, the regulator is writing directly to around 7,700 former members of the British Steel Pension Scheme to invite them to revisit the advice they received and complain if they had concerns.
Only 21 per cent of the 192 instances of advice to former British Steel members reviewed by the FCA appeared to be suitable, 47 per cent were unsuitable and 32 per cent contained information gaps.
One small crumb of comfort, maybe: the FCA has also told DB transfer clients they don’t need a CMC: “You do not need a CMC to help you argue your case as the ombudsman service will investigate independently. If you decide to use a CMC, they are likely to charge you for this service.”
Given the trend of recent years, this might be one more piece of good advice that is ignored.
simoney.kyriakou@ft.com
