In 2018 the FCA made DB pension transfers one of their priorities. At the start of 2018, they collected information from 45 firms. Following which they conducted further assessment work, including file reviews and visits on 18 of those 45. They revealed that since April 2015 the 18 firms have provided 48,248 clients on their DB pension schemes, which resulted in 24,919 actual pension transfers. The FCA expressed their disappointment to have found that less than 50% of the advice that they reviewed was suitable.
This led the FCA to extend their data capture exercise in Q4 to all firms involved with DB transfer advice over the last 5 years.
As members of the APCC, we recently attended a workshop on DB transfers where the FCA shared their views and approach to the DB advice arena. A few of the key findings discussed were related to the role of senior management and the levels of inconsistent advice being provided.
It was found that at several firms, the senior management had failed to identify and mitigate risks associated with DB transfer business. They believe that this was either down to lack of understanding or because they did not adequately oversee the activities of the advisers and PTS. The FCA has highlighted previously the importance of firms having the adequate advisory, PTS and compliance resources in place but they are continuing to see firms whose volumes of transfer advice has risen but their resources remain unchanged.
As a positive, the FCA did share that firms where senior management had recognised that this type of business was high risk, resulting in them putting in place controls such as enhanced compliance arrangements, these firms had better rates of suitable cases. These additional controls enabled any issues to be identified and rectified much sooner.
The FCA has identified that firms are not consistently providing suitable advice on transfers. Their expectations are that advisers have to start from a position that the pension transfer is not suitable, but that there are occasions when it is in the client’s best interests to transfer.
A lot of the findings from unsuitable advice link back to a lack of KYC – key message advisers are not order takers.
It has been advised that triage services are not mandatory. Firms don’t have to do it, instead, they can refer to alternative solutions such as educational videos, or go straight into the advice process. They did, however, reiterate the sentiments from PS18/20, that if any of the client’s personal circumstances are considered during the triage process, then this would likely be deemed advice.
The FCA is looking to do further work in this area and has said to watch this space. One consideration is a single financial guidance body to provide something similar, to plug the gap so that this can be used as triage before any advice is given.
In closing on their key findings, they advised that they expect firms to pay close attention to the feedback and if they fail to review or amend their business models in light of their concerns to expect serious consequences.
Something to take away from this is a quote from the FCA themselves ‘’Any firm that is active in this market can expect to be involved in our work in 2019. We will not hesitate to use our investigatory powers where we identify evidence of serious misconduct which could have caused harm to consumers’’
With this in mind, b-compliant are here to help, to ensure your compliance and regulatory requirements are in order. Contact us today, on 0161 979 0726 or email [email protected] to discuss how we can help you.