FSA orders firms to pay out £150m in redress for pension switching advice
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The FSA has ordered a number of IFA firms to pay out more than £150m worth of redress to clients as part of its follow-up work on pension switching advice.
The FSA says its work has seen great improvement in the market with many firms reviewing past sales and procedures to deliver improved outcomes for customers.
But it says a number of firms are still giving high levels of unsuitable advice. The FSA has carried out further assessments of 22 firms that posed the highest risk of offering poor advice, following its initial thematic review in 2008. These include IFA firms and banks.
It found that of 251 files, 34 per cent involved unsuitable advice, in 31 per cent of cases it was unclear whether the advice was suitable and in 35 per cent of cases the advice was suitable.
Six firms have been referred to the FSA’s enforcement division as a result of work on pension switching. RSM Tenon Financial Services and Charles Palmer of Financial Ltd have already been hit with fines.
The FSA says it is currently in discussions with a number of firms on the format and extent of further remedial work so the number of cases to be reviewed and the redress payable is expected to increase.
It says its follow-up work highlighted additional concerns. Some advisers were found to be offering portfolio advice services, where the additional costs were not justified for a particular customer.
It says it also saw examples of tied advisers not investigating a customer’s existing pension arrangements.The FSA has vowed to follow upthese concerns.
Director of conduct risk Dan Waters (pictured) says more than 10 per cent of all pension switching advice given since April 2006 will be looked at again as part of the past business reviews firms are carrying out, adding that the FSA will “not hesitate” to take further action.
He says: “The actions we have taken to raise standards have driven significant change in the market and will see large sums of money returned to customers who received poor advice. In fact, more than 10 per cent of all pension switching advice since April 2006 will be looked at again.
“However, although many firms have changed the way they operate, we remain concerned that some continue to give poor advice. Ignorance is no defence and we will continue to focus on the high risk firms through intensive supervision. We will not hesitate to take tough action against any firms that fall below our standards.”
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Readers' comments (28)
Evan Owen | 9 Apr 2010 11:37 am
I'm sure there are instances when the regulator's opinion of what is 'suitable' does not concur with that of a professional adviser with many years experience, and a G60 qualification to boot. What do qualifications prove when an enquiring mind would normally preclude 'risky' business such as pension switching, NDF, Keydata and all the other baggage some firms are sitting on?
Over the years I have seen 'consumers' forced back into pension schemes which shortly afterwards collapsed, all because the regulator believed that the adviser was wrong to transfer the funds to a personal arrangement, who compensates the badly 'compensated'?
The true test of what is suitable is time, a prime example would be a recent mortgage endowment maturity which produced more than was required to repay the loan, unfortunately for the adviser he had paid out >£2,000 in compensation when the 'consumer' complained in 2002, the end result is that the 'consumer' is in a position of betterment which is not only immoral but possibly a crime under the Fraud Act..
I have seen Section 32 buyout policies pay out more than was required to meet the benefits provided by the ceding scheme, guess where the surplus went!
As for tied advisers not investgating a customer's existing arrangements this has been going on since well before 'A' day 1987, what has the regulator been doing all these years?
I could go on and on but I'm losing the will to type...it is so frustrating to see such pathetic regulation, I don't condone poor advice, however poor regulation is far more damaging for 'consumers'.
What is a 'consumer?
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Anonymous | 9 Apr 2010 11:48 am
IFA responses to this are noticeable by their absence! Maybe this indicates that not all IFA's are as focused on whats best for their customers.
"People in glass houses..." springs to mind.
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Simon Webster | 9 Apr 2010 11:56 am
"Additional costs not justified for a particular customer." What does this mean? I can't justify the fact that I drive a Merc and not a Lada but I certainly prefer it. If the customer knows the cost and is prepared to pay for a service I do not understand the issue.
The FSA needs to provide clarity as to the exact nature of their problem. Regulation by combative press release is not regulation at all. But then I suppose that sums up the FSA!
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Julian Stevens | 9 Apr 2010 12:08 pm
"It says it also saw examples of tied advisers not investigating a customer’s existing pension arrangements." Hmmmm ~ now that's a really tricky one, because an assessment of any existing pension arrangement must conclude with some sort of advice as to whether it's good, bad or indiferent. But tied advisers aren't authorised to advise on any products other than those offered by their host company.
The only way in which FSA can possibly deal with that one is to ban all tied advisers from giving advice on pension switching.
Oh yes ~ perhaps Disparate Dan could refer us to the FSA's guidance on this type of business that was in place and accessible to the adviser community prior to 2006.
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Incompetent Regulators Awards Team | 9 Apr 2010 12:14 pm
To Anon 11.48 am. I am an IFA and this is silly smal fry stuff which doesn't need a stupid Leviathan to deal with it.
A small IFA led professional body could deal with this with very few staff and costs. If we then consider all the mistakes the FSA staff has made and fined them individually they would all be personal bankrupt by now as well as the FSA (employer) being bankrupt. So stick you 'stones and glass houses.......' comments where they belong!
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Andy | 9 Apr 2010 12:19 pm
It just goes to show that the public is best served by going to one of the larger banks for their advice
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Tom Evans | 9 Apr 2010 12:21 pm
People in glass houses...
If you could write in a legible form Anonymous IFA's could reply to your illegible tat.
Who can take you serious when you dare not put your name?
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Anonymous | 9 Apr 2010 12:22 pm
When the FSA talk about taking action against firms that fall below their standards they mean the standards they set for us IFAs. They don't mean the standards that they set for their own competence, integrity or efficiency.
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David Drane | 9 Apr 2010 12:25 pm
The article was posted at 11.39. Anon posted at 11.48 saying the absence of comments.... I Dont you think it would be strange to see a multitude of responses within 9 minutes of the article being posted.
I think the article is quite positive as the size of the redress is actually quite small so far. Also, if you look at the FSA reviews on these then it tends to be more minor issues.
However, like Simon above, there is a bit of an assumption that everything should be in the cheapest. That should not be the case. If it was then why do M&S sell food or why do waitrose exist. If someone wants to pay for a service then there should not be a problem.
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Chris Neil | 9 Apr 2010 12:25 pm
ANONYMOUS post 11.48
And your point is?
If you are going to post at least have the balls to put your name to it... You should get a job at the FSA as you will fit in with all the other faceless tossers that work there.
CHRIS NEIL
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