Financial Conduct Authority  

FCA probes advisers on revenue from insistent clients

FCA probes advisers on revenue from insistent clients

The financial regulator is probing advisers on revenue received from clients who were advised against a defined benefit transfer but proceeded on an insistent basis anyway. 

In a survey sent to thousands of advisers in the defined benefit market this week, the Financial Conduct Authority asked up to 36 questions about the pension transfer advice they provided between October 2018 and March 2020. 

In a copy seen by FTAdviser one of the questions asked advisers how much revenue they received from advising insistent clients on pensions transfers and conversions, including advice on any investment proceeds and implementation charges. 

Last year the regulator published the results of its last survey of the defined benefit market, between April 2015 and September 2018, which across 3,015 firms found almost 10,000 clients had proceeded with a defined benefit transfer on an insistent basis.  

The topic has been gaining traction in the industry over recent years, with the Personal Finance Society repeatedly warning of the risks associated with facilitating insistent clients - including the impact it could have on an adviser's professional indemnity insurance. 

In its survey sent to firms this week the regulator also quizzed advisers on its dealings with both authorised and unauthorised introducers and how many clients were given pension transfer advice by appointed representatives. 

The British Steel Pension Scheme featured in the first two questions of the survey, with advisers asked to provide details of how many members they advised to transfer their pension between March 2017 and March 2018.

Advisers were also asked about their charging structures and the charges of any investment products clients transferred their pension into. 

Earlier this week FTAdviser reported the FCA had given the advice industry prior warning about the survey expected to land in their inboxes this week amid scam concerns. 

In May warning bells were sounded over scammers targeting financial advisers by sending a fake email purporting to be from the City watchdog with a due diligence request.

Some have warned scam emails of this nature leave advisers particularly susceptible because firms are concerned about missing or ignoring requests from the regulator in the current socio-economic climate. 

The City watchdog has long said too many firms are recommending large numbers of consumers transfer out of their defined benefit pension schemes, despite its stance that transfers are likely to be unsuitable for most clients. 

Earlier this month the regulator revealed its intervention had led to more than 700 advice firms relinquishing their defined benefit transfer permissions, with the City watchdog currently pursuing 30 enforcement investigations following concerns arising from its transfer work.

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