FCA cracks down on Woodford and DB pensions: the week in news

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FCA cracks down on Woodford and DB pensions: the week in news

As the race to No 10. continues the financial regulator too has had its hands full this week, launching an investigation into the suspension of Neil Woodford’s Equity Income fund and warning advice in the defined benefit transfer market was still subpar. 

It's time for the week in news. 

1) FCA launches Woodford Investigation

The Woodford saga continued this week as the financial regulator announced an investigation into the events which lead to the suspension of Neil Woodford’s Equity Income fund

Since suspending dealing in his £3.75bn fund on June 3, Mr Woodford has been working hard to sell shares to find the money for any redemptions for when the fund reopens.

But intervention from MPs and the regulator over the past two weeks accumulated on Tuesday (June 18) when Andrew Bailey confirmed the FCA had opened an investigation into the debacle and at the same time revealed it had increased its supervision of the fund as early as February last year. 

This was after the fund had breached the 10 per cent limit on the maximum proportion of unlisted securities it is allowed to hold on two occasions in February and March 2018.

2) 500 Sipp complaints to reach FSCS 

On Wednesday (June 19) FTAdviser reported the Financial Ombudsman Service had received 500 claims relating to GPC Sipp Limited, which entered administration last week. GPC had thousands of Sipps holding alternative investments, several of which failed, such as the luxury hotel development Harlequin Properties which was never built.

Any open claims against the company will now be transferred to the Financial Services Compensation Scheme which will decide whether to process them.

A compensation limit of £85,000 will apply if the complaint is about a firm that failed after April 2019, or £50,000 before that.

3) FCA warns of DB crackdown

The regulator continued its crackdown on the defined benefit transfer market this week, warning it had started to visit the most active advisers in the sector after detecting large volumes of sub-standard advice. 

Publishing the results of its survey of 3,015 firms on Wednesday (June 19) the FCA also voiced concern about the volumes of recommendations, with 69 per cent of individuals having been recommended to transfer. This was despite the regulator's stance that transfers are unlikely to be suitable for most clients.

Megan Butler, the FCA’s executive director of supervision in wholesale and specialists, warned advisers were not paying enough attention to the possibility of a transfer being the wrong choice for a client and the advice being offered in these cases was not personal enough. 

Ms Butler said the industry would see more action from the FCA.

4) Platform giants warn of switching rules 

Earlier this year the FCA took steps to make it easier for advisers to switch platforms, stating in its interim platform study it was keen for advisers to do so if in the best interests of the client.

In particular the regulator wants the platform from which the client is switching to create a new share class to match the share classes available on the platform that is receiving the client's assets.

But this week senior platform industry figures warned the proposals could have unintended consequences, including "significant initial and ongoing costs". 

Steven Cameron, pensions director at Aegon, said the proposals could result in "thousands" of extra share classes having to be added, creating additional costs and potential delays. 

Steven Levin, chief executive of Quilter-owned platform Old Mutual Wealth, warned platforms would be required to hold "thousands of new share classes, increasing the risk of customers inadvertently selecting an unintended share class and/or not the cheapest available". 

5) Adviser role to change "significantly"

A warning was issued to advisers this week that they "risk obsolescence" if they fail to adapt to new skills, including the use of artificial intelligence.

The warning came as the CFA Institute published its Investment Professional of the Future report on Monday (17 June), with a poll suggesting the majority of advisers feel their role will be significantly different or even nonexistent within the next ten years. 

The institute warned of a "disruptive and complex" environment in which advisers must adapt to survive, including embracing what is expected to become the growing role of artificial intelligence in the investment industry.


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