The FCA has raised the prospect of further sanctions over advice to transfer out of the British Steel Pension Scheme as consumers could be in line for compensation payments.
Giving evidence to MPs on the work and pensions select committee, FCA supervision director Megan Butler said that while the regulator had so far acted to stop rogues causing any more damage, it would soon enter a second phase of work where it could look at sanctions and redress for unsuitable recommendations.
The FCA is also attempting to get information on all advisers who have done British Steel transfers, according to Butler.
She said: “What we have been very focused on over the last month or so is making sure that we can cauterize the immediate harm. That is not the end of this story. If there are people who have found themselves in schemes on the back of unsuitable advice they may well be entitled to compensation and that is phase two of this process.
“In appropriate circumstances people will find themselves referred for enforcement action.”
Butler recapped the FCA’s action over British Steel defined benefit transfers, naming the firms that had ceased giving advice as a result: Active Wealth, Pembrokeshire Mortgage Centre Limited, Mansion Park and a fourth firm that is still under investigation.
Of the 38,000 BSPS members, 12,200 have applied for a transfer value and more than 2,000 transfers have been made or are in progress.
Butler said: “We recognise that this advice is possibly the most complex financial advice that is ever heard by the client but also provided by the adviser which is why they need a particular permission…. Advisers are not getting it as right as they should be”
The FCA has hosted four seminars with advisers so far, two in Wales and two in Doncaster, and has written to 148 more.
The 10 firms the FCA has visited account for three-quarters of the DB transfers from BSPS.
An open public meeting will take place tomorrow with the FCA, The Pensions Regulator and The Pensions Advisory Service.
Butler said: “Intelligence is what we need, intelligence is what we gathered when we went down for our seminars…if we get that information we can and we do act on it and take action on those not providing [suitable] advice.”
Buter described contingent charging – where advisers have levy additional charges based on a transfer occuring – as an “Inherent conflict of interest that really needs to be well managed in all of this.”
She urged unregulated introducer firms to stay “absolutely and clearly away from that line which is the provision of advice” and noted that fund choices and the ongoing charges paid for them were “absolutely central” to getting transfer advice right.
Also giving evidence this morning, First Actuarial director Henry Tapper, who has been campaigning over BSPS transfers, said advisers he saw were typically charging 2 per cent of the transfer value for advice.
He said: “My worries were that the advice that was given was biased towards advice to take money away from the scheme because that was the way the IFA would be paid.”