Defined Benefit 

DB transfer adviser in regulatory hot water

DB transfer adviser in regulatory hot water

A financial adviser who signed off on 500 defined benefit transfers has been handed a warning notice by the Financial Conduct Authority.

The FCA took the action because it claimed the adviser had failed to meet a long list of regulatory obligations, and had therefore not provided suitable advice.

The regulator said, had the members received suitable advice, many would not have opted to transfer out of the DB scheme.

The adviser in question, whom the FCA did not name, advised 700 clients between 2006 and 2009, as part of an enhanced transfer value (ETV) exercise conducted by their employer.

Five hundred of these went ahead with the transfer, with a total of £12.7m leaving the employer's pension scheme.

The FCA listed six areas in which the adviser failed to meet regulatory standards.

These included failing to take "reasonable steps" to  adequately to inform himself about his obligations as a CF10-qualified adviser, as well as about the "specific nature and risks of the ETV advice business".

He also failed to take reasonable steps to ensure the ETV advice process "complied with, and was capable of providing advice that complied with, applicable regulatory requirements".

The FCA also criticised the adviser for failing to "identify and manage adequately potential conflicts of interest in relation to ... the payment of commission to the firms by the pension provider to whom customers transferred; and ... proportion of the proceeds from the ETV advice business that he conducted".

"As a result of the individual’s failings, DB scheme members were at serious risk of receiving unsuitable advice," the regulator stated. 

"This risk crystallised, resulting in a serious risk of unsuitable customer outcomes.

"The FCA considers it likely that a significant proportion of the approximately 500 members who transferred from a DB scheme to a DC scheme would have decided not to transfer had they received suitable advice," it said.

The warning notice came two weeks after the FCA fired a warning shot at advisers who it believed were cutting corners on DB transfer advice.

In particular, the regulator warned that a number of advisers were assessing DB transfers based solely on critical yield.

Kim Barrett, a DB transfer-qualified financial adviser with Barretts Financial Solutions, said it was right that the FCA should crack down on individual advisers who were failing to meet regulatory standards.

However, he said he was "alarmed" at the stern warnings the regulator was issuing more generally.

He said since pension freedoms, people had been handed the right to decide what they did with their pensions. But he said the FCA's stance on DB transfers in some respects took a contradictory stance, and at times approached "nanny statism".

"I understand the FCA is jittery with pension freedoms," he said. "But I'd like to see them working more with advisers, rather than standing on the sideline with a cane, slapping them on the wrist all the time."

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