Your IndustryOct 6 2017

Unhappy FCA & a stripped down Fos: the week in news

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Unhappy FCA & a stripped down Fos: the week in news

The FCA has got a bee in its bonnet about pension transfer advice, and the Ombudsman is getting ready to shape up and lean out for life after PPI. Here’s our Week in News roundup to sum up those big stories.

Pension transfer failings

With great power comes great responsibility. The government placed the power back in people’s hands when it unlocked the door to pensions freedom. But as people make their own decisions about pension transfers, advisers facilitating them are feeling the regulator’s ire.

The FCA says more than half of DB pension transfers it looked at were made on the basis of unclear or unsuitable advice. At the heart of the problem, it says, is advice firms not gathering enough information about client’s needs and personal circumstances.

Some advisers, on the other hand, say the FCA should have expected these problems when it let the cat out of the bag by giving people control of their pension pots.

How to do pension transfers right

The regulator doesn’t want to teach granny how to suck eggs, but FCA special adviser Maggie Craig told delegates at FTAdviser’s Unpackaging Pensions event that generic advice on transfers just isn’t good enough.

She spelled out exactly what advisers need to do to keep the FCA happy, and said the onus is on them to prove that transferring a pension is the right decision. They also need to think about whether clients will access funds as regular income or ad hoc.

Many advisers would say they spend a large portion of their day thinking about client income. Ms Craig emphasised she wasn’t telling advisers how to do their job, simply giving more guidance, but she might have put a few noses out of joint.

Aviva wades into the debate 

Advisers need to toughen up and ask the hard questions of the firms to which they outsource, that was the rallying cry from Aviva’s John Lawson this week. He was responding to some of those FCA worries about DB pension transfers.

The regulator says firms are making recommendations without thinking about the receiving scheme or the adviser’s intentions for the pension. Mr Lawson said the current system is still workable, as long as the correct relationship is created, and advisers quiz transfer specialists properly beforehand. Soon a Paxman-style grilling could be a precursor to any business transaction.

Insistent clients and the Fos

The FOS has given advisers some tips on how to cover themselves against complaints from insistent clients. Speaking at FTAdviser’s even Unpackaging Pensions, lead FOS ombudsman Caroline Mitchell said IFAs dealing with those tough clients should get everything in writing, and even tape them, so any complaints they make can be swiftly thrown out. Although it’s not a ‘get out of jail free card’, even a handwritten note confirming someone wants to proceed against the adviser’s recommendations can be enough to prevent a tricky customer coming back to haunt them years down the line.

A leaner meaner Ombudsman

The FOS is about to get leaner, cutting costs as the tsunami of PPI complaints finally comes to an end in 2019. Over a decade, the Ombudsman’s workforce has swelled from 350 to 4,000, and the number of cases on their books has shot up from 20,000 to 500,000. Remove PPI, and things get a lot easier, despite a few blips from mortgage endowments and split cap investment trusts. The FOS will overhaul how it deals with enquiries in a bid to handle complaints more swiftly in a post-PPI world, which will surely come as a relief to the whole industry.