Regulators have been urged to look again at the role of introducers in the British Steel Pension Scheme transfers scandal that has seen £36.5mn paid out in compensation.
Last week (February 11), Labour MP Nick Smith wrote to the Financial Conduct Authority, the Financial Ombudsman Service and the Financial Services Compensation Scheme and asked them to look at the role of introducers with regards to BSPS transfers, expressing his concern about the way they are regulated.
Smith said: "As you will know, introducers have been widely reported to have played a key role in the mis-selling surrounding BSPS transfers. While in many cases the introducers were authorised and regulated [independent financial advisers], in some cases they were not, so they don’t have to have any oversight by the FCA nor are their clients protected by the Fos or FSCS.
“Indeed, in the past, there have been concerns and action from regulators on unauthorised introducers who had misled consumers into thinking they were regulated bodies or had even put money into risky investments which later failed. In 2017, the FCA launched legal action against two pension introducers for misleading customers.”
Smith said he was “deeply concerned” at the number of BSPS mis-selling cases that involved introducers, citing one in particular that referred 75 steelworkers to Active Wealth (UK) Ltd, which was subsequently declared in default by the FSCS.
Despite the introducer and Active Wealth “[acting] together in the misselling, only one was liable to pay compensation to the claimants. This has limited the amount that steelworkers have been able to claim back,” he explained.
He also expressed his concern that the Fos is not upholding any complaints pertaining to introducers where there is no written record of advice being given by them.
He also said there was a "refusal to uphold any complaints that there was a joint venture between the introducer and the pension transfer specialist (PTS) even where more than 30 clients of the same firm have complained that they were verbally advised to transfer by the introducer, never spoke to the PTS and the introducer and PTS shared in the transfer fee”.
“In one case, the PTS was given a room in the offices of the introducer and physically walked the clients into the office for the inevitable advice to transfer,” Smith said.
He pointed to FCA advice which stated that transferring out of defined benefit schemes may only be the right course of action in as little as 10 per cent of cases, arguing that introducers should have been aware that there was a risk of bad advice being given if more than one in 10 of the members they dealt with opted to transfer.
“They should certainly not have turned a blind eye and continued to refer clients where they knew the outcome was not in the clients’ best interests. One can only assume that the lure of fees drove this behaviour and I cannot imagine that you could wish for them to benefit from that,” he wrote.