Defined BenefitNov 16 2020

FCA opened 67 investigations into DB advice in three years

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FCA opened 67 investigations into DB advice in three years

The number of investigations has noticeably dropped since 2018, despite the number of transfer complaints passing through the Financial Ombudsman Service following a clear upward trajectory. 

As of June this year there were 1,965 firms in the UK licensed to provide defined benefit transfer advice, a market which has been the subject of heavy scrutiny by the Financial Conduct Authority in recent years. 

In response to a Freedom of Information request submitted by regulatory consultancy Duff & Phelps, the regulator revealed it had opened a total of 11 investigations into defined benefit advice so far this year - four investigations into firms and seven investigations into individuals. 

The figures are a significant drop on the 46 cases opened by the FCA in 2018, but an increase on the 10 investigations launched in 2019. 

Consumer complaints on the up

A separate FOI request submitted by Duff & Phelps found consumer complaints to the financial ombudsman regarding misadvised defined benefit transfers had jumped 26 per cent from 441 in 2018 to 554 in 2019.

The data showed complaints for 2020 currently stood at 504 for the period between January and August 2020, which Duff & Phelps predicted meant cases were set to surpass those recorded in 2019.

Mark Turner, managing director of compliance and regulatory consulting at Duff & Phelps, said now was an important time for regulators, advisers and consumers to "stay vigilant".

He said: "The FCA’s decision to go ahead with the contingent charging ban is part of a broader agenda of them taking decisive action where markets are not seen as supporting the best interests of consumers.

"As the initial shock of Covid-19 begins to plateau, regulators have already begun to refocus their attention to issues and concerns which might have taken a backseat in recent months—and defined benefit transfers will return to the forefront as a key area for scrutiny in the following months and years."

In June the FCA revealed more than 700 advice firms had relinquished their defined benefit transfer permissions after intervention from the regulator. 

But the chairman of the FCA recently hailed significant improvement in the transfer advice market following the watchdog's "systematic and intensive" supervision drive. 

Steven Cameron, public affairs director at Aegon, said the FCA had maintained a strong focus on improving defined benefit transfer advice over recent years.

Mr Cameron said: "We are confident the quality of advice continues to improve, but this may be at the expense of a reduction in supply as a result of changing rules, new restrictions and PI cover challenges.

"This is worrying as the need for advice is as high as ever. It may take some time for improvements to show through in investigation numbers and indeed the prominence given to past concerns may actually increase the number of complaints in the shorter term.

"What’s important is making sure there is an ongoing supply of advice and that those who need it have confidence in high standards of professionalism."

What the regulator said

An FCA spokesperson told FTAdviser the regulator had given almost 1,650 firms "detailed feedback" on how they can improve their advice. 

The spokesperson said: "In our latest review of the defined benefit pension advice market, in which we assessed 85 firms responsible for 43 per cent of advice given in the market, we subjected 55 firms to a detailed file review assessment, and 32 firms have since stopped giving advice. 

"We speak regularly to firms about what they should do to remedy unsuitable advice, including whether to conduct a past business review, and continue to monitor emerging risks in the market, so that we can act swiftly to protect consumers if we need to. 

"Whenever we suspect serious misconduct has occurred, we investigate to find out what happened, to determine what action to take, including whether to take enforcement action."

rachel.mortimer@ft.com

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