FSA fines IFA director £49,000 for pension switching failings
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The FSA has fined Charles Palmer, director of Gloucestershire based IFA network, Financial Ltd, £49,000 for management failings which resulted in poor compliance monitoring on pension switching advice during a period of rapid expansion.
Palmer’s firm also owns IFA TV and Palmer himself (pictured) regularly presents videos on the website. One of the firm’s videos, which does not feature Palmer himself, asks where the FSA is heading next with its pension switching visits (see clip 1 below), while a second video talks in details about the FSA’s crackdown on pension switching advice (see clip 2 below).
Financial Ltd has agreed to carry out a past business review, which may lead to customer redress if it is found that unsuitable advice was given.
During its investigation, the FSA found shortcomings in the way the firm organised its business and how responsibility for monitoring advisers was allocated to senior management. In turn, this led to concerns about the monitoring of the quality of pension switching advice given by advisers between April 2006 and August 2008.
The FSA found that Palmer failed to establish and maintain a clear and appropriate reporting structure to ensure senior management understood and carried out their responsibilities for monitoring the network’s advisers.
It also found he failed to ensure the firm complied with rules and requirements to ensure that pension switching advice was demonstrably suitable and ensure that the firm recruited sufficient and adequate compliance and support staff during a period rapid expansion of the firm’s network of advisers.
FSA’s director of enforcement and financial crime Margaret Cole says: “This is the second enforcement action we have taken following the FSA’s review of pension switching advice. As the director of the firm, Palmer was personally accountable for failing to take the steps needed to manage the risk of advisers giving potentially unsuitable advice during a period when the IFA network was expanding so rapidly.
“As we have demonstrated with this case, and the Tenon example last week, we are following up on our promise to take action against firms who are failing to offer customers suitable pension switching advice.”
Because Palmer co-operated fully with the FSA and agreed to settle at an early stage of the FSA’s investigation, he qualified for a 30% reduction in penalty. Were it not for this discount, the FSA would have imposed a financial penalty of £70,000.
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Readers' comments (22)
Steve Laird | 3 Mar 2010 11:29 am
I looked at Financial some years ago. Their fees were very low compared to most other networks. Perhaps this explains the lack of rigour in the reporting?
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Andy | 3 Mar 2010 11:45 am
None of the banks would have had the same failings. Many other IFA firms would.....
No firm is whiter than white but why do IFAs feel the need to claim they are?
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Anonymous | 3 Mar 2010 11:45 am
I am a member of the Financial Network and can report that robust systems are now in place to deal with pension switches since 2008.
I suspect that with the benefit of hindsight the FSA can find fault with the majority of past pension switching advice.
I use Financial as there fees are very competitive, maybe they did growth too quickly, but that doesn't excuse the member IFA from cutting corners, shame Charlie was fined. But was probably an easy target for the FSA.
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Anonymous | 3 Mar 2010 11:50 am
The number of people I have tried to recruit to my company that didn't because these were 'cheaper' must now relaise that cheap doesn't mean best and certainly not safest and secure for the future. When will they learn that simple fact?
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George Thorpe | 3 Mar 2010 11:56 am
I was until recently a member of the Network and can confirm that their compliance monitoring was very thorough and carried out very efficiently in my case.
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Julian Stevens | 3 Mar 2010 11:59 am
I imagine a few of Charlie's counterparts at other networks may well be rushing for the white room and hoping they get there in time.
With the benefit of hindsight testing, the FSA can basically find any faults it wants with any area of business, regardless of whether or not it [the FSA] provided the industry with any sort of regulatory guidance in advance.
It's a bit like being prosecuted for having driven the wrong way up a one way street before it was actually made one way. Only hugely worse.
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Anonymous | 3 Mar 2010 12:01 pm
Let me tell you that the quality of communications from this group is 1st class. I am not a member because Networks don’t suit me but I suspect strongly that Charlie Palmers robust stance against the insanity of the FSA has more to do with this fine than any shortfalls in their regulatory standards.
What’s more having been hit like this it is likely that their standards will be even more robust.
The Lord's Prayer has 66 words.
The Ten Commandments have 179 words.
The Gettysburg Address is just 286 words.
The small FSA handbook 400,000 words
The FSA handbook has approx 4,000,000 words.
OK, so I didn’t count the words in the FSA handbook but I reckon 400 words per page is a good average. The FSA have designed the rules so you will always be deemed to fail so this is no cause to stand on the side and say I told you so.
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Anonymous | 3 Mar 2010 12:17 pm
When they charge so little how can you expect them to have any resonable sstems and controls
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Anonymous | 3 Mar 2010 12:41 pm
Nice to see there is support for the Network from its members... As a member of another Network, I can assure you that expensive doesn't mean best either.... see you on the 25th.. :-)
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Anonymous | 3 Mar 2010 1:02 pm
I went to a meeting/workshop with the FSA early 2005 They said interpret the rules as you see fit as any 2 compliance officers for the fsa may interpret the rules differently to each other. HBOS were told the same and look what happened to them. Have HBOS been fined? Will HBOS be fined I doubt it. The FSA did not provide any guidance or direction in the first instance. Every small directly authorised firm should be worried about their tough stance now
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