Financial Conduct Authority  

DB transfer advice left out of FCA market review

DB transfer advice left out of FCA market review

The Financial Conduct Authority will not focus on defined benefit transfers in its review of the advice industry, as it prepares to survey a "selected sample" of additional firms next month. 

In May the regulator published a call for input on the impact of the Retail Distribution Review and the Financial Advice Market Review, asking for industry feedback on the role of regulation in the market, barriers to effective competition and the affordability of advice and guidance.

At the time the FCA admitted some aspects of its regulation may be having a "negative impact" on the market, and by extension consumers.

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In an update today (July 22) the City-watchdog confirmed the scope of the review and said requirements relating to DB pension transfers, the Financial Ombudsman Service compensation issue, or FSCS funding would not be included.

The FCA said: "It would not be an efficient use of our resources to focus in this review on areas where there are other FCA projects that are either underway, or have recently been completed in these areas.

"Our work will be informed by these other projects, but we don’t want to duplicate work in these areas."

The FCA said it received 57 responses to its call for input, with key themes including access to appropriate services, the regulatory perimeter between guidance and advice and innovation of services already emerging. 

It said any feedback the regulator has received in its call for input about the areas it will not be including in its review will be fed into relevant projects elsewhere in the organisation. 

The regulator confirmed it would be conducting additional research over the coming months, including a survey of a "selected sample" of firms in the advice industry at the beginning of August. 

Selected companies will have until the end of September to complete the survey and the FCA expects to publish its final report on the review in 2020. 

In June the FCA published the results of its survey of 3,015 firms concluding that too much of the advice on DB transfers it has seen was "still not of an acceptable standard" and warning it had already started visiting the most active advisers in the space. 

The last few months have also seen a number of professional indemnity insurers shy away from the DB market, or excluding activity in this sector from advisers' policies. This was in the aftermath of the FCA's decision to increase the compensation limit of the financial ombudsman to £350,000 in April. 

Mike Lacey, partner at Berkshire-based financial adviser firm Bowman Pension Consulting, said: "I struggle to think of an area of financial advice more in need of decent FCA input and guidance than defined benefit and safeguarded rights transfers.

"Not only are the sums involved eye-wateringly large for the average holder of these benefits, but the impact of inadequate advice can be catastrophic. 

"Far too many firms are pulling out of this whole area, as there has been some rogue activity that has poisoned the whole transfer landscape."