Staff at the Financial Conduct Authority are being trained that advisers may face “no perfect solutions” under the pension freedoms regime, documents from the regulator show.
This comes from a presentation given to those training to carry out file reviews for the regulator, released under the freedom of information legislation.
The presentation also reminds the trainee file reviewers there may be an “absence of [a] demonstrably better option” and that they shouldn’t be “judgemental about a client’s objectives”.
It added that clients can be “irrational” but can base this on factual information.
The presentation gave the example of a client seeking to use half their pension to buy a sports car and suggested this could be acceptable if the adviser clearly sets out the risks, establishes the level of income left and assesses it against the client’s needs.
It also sets out a number of rules for file reviews, such as “outcome not process”, “keep it balanced” and “evidence-based”.
With regards to the first of these, the document lists two questions for file reviewers: “has the client ended up with the right solution?” and “have the required disclosures been made and is the client likely to understand?”.
For the third of these, the presentation says file reviewers need to find a “positive reason” for believing the advice is unsuitable.
If there is not enough evidence to decide, the presentation says a file must be labelled unclear.
With regards to insistent clients, the file reviewers are told to look for three things: a suitable recommendation, a clear explanation of the risks of the alternative course of action, and a flag that the client is acting against advice.
The presentation also addressed high adviser charges, saying that as long as they are disclosed clearly then it is a matter for the client unless in instances of “self-defeating transactions”.
damian.fantato@ft.com
