The Financial Conduct Authority has stopped 24 firms from giving defined benefit transfer advice over concerns about the quality of the advice.
In a podcast streamed on its website today (January 8) the regulator revealed it has assessed 63 pension advice firms in the past year of which 24 were prevented from providing a service in this area.
Among the firms known to have given up their permissions is national advice firm LEBC, which disclosed in September that a review from the regulator had prompted it to take the step.
The regulator had also intervened at a number of British Steel advisers, some of which had since regained their permissions, while others shut up shop.
The FCA's head of retail investments supervision, Chris McGrath, said while about 90 per cent of advice was generally suitable, in the DB market that suitability rate had dropped to about 50 per cent, which was "simply not good enough".
To crack down on the issue the FCA is in the process of assessing the 90 "most impactful firms that are operating in this space" which involved "visiting the firm, understanding their approach and their processes around defined benefits advice and making judgements on whether they are giving good advice or not and taking action on them."
The FCA has also written to 1,600 of the "less impactful firms" outlining specific concerns on individual firms and asking for a response. "Depending on the adequacy of the response, we’ll follow up on that," Mr Mc Grath said.
He said: "Where we see significant bad practice in firms, we’ll stop those firms and we’ve stopped 24 of the 63 firms we’ve assessed so far [in 2019], so that’s quite a high proportion of them.
"Where those firms can fix the problems we’ve identified, we will consider allowing them to resume DB transferred business but only once they have satisfied us that they’ve made the appropriate fixes to the problems that we’ve identified.
"Where firms can’t fix the problems, or show a lack of willingness to fix the problems, they will exit the market and we’ve seen a number of firms doing that already."
He added: "Now, where we see serious misconduct in firms when we go out and visit firms and we actually see serious misconduct, we will take enforcement action which can result in fines and in banning people from operating in the financial services industry."
Mr McGrath reiterated the regulator's stance on contingent charging, which it is planning to ban as part of its crackdown in this space.
He said: "By banning it, we’re removing that financial incentive from advisers to offer that sort of advice and so there’s more chance that an adviser will simply give that person the advice based on their individual circumstances rather than the fee they might receive or not."