The government announced progress on a pensions cold calling ban among Budget policy announcements today, stating some IFAs will have to find new ways of marketing.
It confirmed a focus on lead generators and said some IFAs will be affected because they legitimately use the service of companies who find new clients through cold calling.
A document showing responses to a consultation on draft regulation states: “There are two types of legitimate businesses which will be affected by this legislation: small lead generation marketing firms and small financial advice firms which use the services of lead generation firms to gain new clients.”
The government notes: “Larger advice firms do not tend to use the services of lead generation firms because they already have an established client bank.”
The document also mentions the phenomenon of in-person introducers, which it calls “factory-gating…where lead generators meet prospective clients in person and introduce them to unscrupulous financial advisers.”
It notes: “Whilst not within scope of the regulations to ban pensions cold calling, the government recognises that this is an important issue and is in active discussions with the FCA to keep it under review.”
In an impact assessment of the proposed legislation the government says IFAs using lead generators will need to find alternatives to lead generators for pension business.
It says: “Once the ban comes into force, the small proportion of IFAs that use lead generation firms will need to stop using the services of these firms. They will continue to have other marketing options available to them to gain business.
“Lead generation firms will no longer be able to undertake pensions cold calling. If a lead generation firm relies heavily on contracts with IFAs to generate pensions leads through cold calling, they will need to adapt their business model.”
Following the consultation responses the government says it will now put the draft regulations before parliament this autumn. Assuming it gains parliamentary approval the aim is to bring it in to force soon after.
The 40 responses to July’s draft regulations came from pensions firms, financial advisers, professional bodies, industry groups, consumer groups, charities and individual members of the public. Their suggestions included making it compulsory to seek advice before making any type of pension transfer.
The government acknowledges the risk of fraud members of the public face from cold calling scams: “Pension scams can have devastating consequences, such as the loss of an entire pension fund. On top of this, the chances of recovering these savings are very low, leaving most victims without the means to fund their retirement.
“Cold calling is the most common method used to initiate pension fraud. The serious consumer detriment caused by pensions scams means that the government has chosen to intervene directly to implement a pensions cold calling ban.”
A lobby for a cold calling ban first started in 2016 and was strongly backed by the advice community.