The Financial Conduct Authority has given advisers two months to rectify the risks it found in their defined benefit transfer practice, else further action might be taken, FTAdviser has learned.
The regulator is in the process of writing to around 1,600 firms at which it identified concerns surrounding its pension transfer advice, more than half of the 2,500 advice firms which operate in the defined benefit market.
FTAdviser understands each letter is tailored to the recipient firm, which will be given two months to address any areas in which the FCA has identified room for improvement.
Advisers will be expected to act on the recommendations before the deadline and demonstrate to the FCA they have done so, or write to the regulator explaining why they have failed to rectify the risks.
The watchdog is then set to conduct a further round of assessments in 2020 and if it finds concerns persist further action against firms is "likely".
The move is part of the FCA's growing effort to crack down on poor advice in the pension sector, following a survey published in June in which it found too much of the advice on defined benefit transfers it had seen was "still not of an acceptable standard".
Following the survey of 3,015 firms between April 2015 and September 2018 the regulator voiced concern about the volumes of recommendations to transfer it had seen, with 69 per cent of clients having been recommended to transfer out of their scheme despite the watchdog's firm stance that this is likely to be unsuitable for most clients.
The watchdog found the average transfer value was £352,303, equivalent to a total value advised on of £82.8bn.
The data submitted to the survey shaped the letters now being sent to advice firms, covering areas including insistent clients, volumes of transfers, and dealing with unauthorised introducers.
Since the survey the FCA has been reviewing transfer advice at firms across the country with the regulator's visit to national IFA firm LEBC resulting in the company agreeing to give up its defined benefit permissions in September.
LEBC voluntarily ceased work in the sector, with its majority shareholder BP Marsh & Partners confirming its officials were working closely with the adviser's management team to return the firm to "the position it was in before the FCA review".
As part of its work in the sector the FCA has also proposed to ban contingent charging on transfer advice and instead introduce a form of 'abridged' advice, the main purpose of which is to assess clients' suitability for a transfer earlier on.
Speaking at the Personal Investment Management & Financial Advice Association summit in London last week, Debbie Gupta, director of life insurance and financial advice at the FCA, said transfer advice would remain a supervision priority for the FCA.
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