The FCA has ordered eight advice firms to carry out skilled persons reports in relation to insistent clients following a thematic review on pension transfers, Money Marketing understands.
A skilled persons report, also known as a Section 166 report, checks for weaknesses or failings in a firm’s practices. The review can result in enforcement action and its costs are covered by the firm.
Last July, the FCA found a number of suitability failings in a review into bulk pension transfer advice provided by financial advisers where employers offered an enhanced transfer value.
The regulator found that, in 59 per cent of the files reviewed, the transfers had taken place on an insistent basis after a recommendation had been made. It said a “significant” proportion of files did not record the reasons for the decision to act on an insistent basis.
The FCA said at the time it would work with individual advice firms to address unfair outcomes.
Money Marketing understands that eight firms have been asked to carry out an S166 review as a result.
Experts say the action should be taken as a further warning against processing defined benefit to defined contribution transfers following a negative recommendation in the wake of the pension reforms.
Personal Finance Society chief executive Keith Richards says: “There are a lot of similarities between the incentives to take an ETV and those to access cash under the pension freedoms. For instance, the cash transfer value has already started to feature prominently on annual statements for DB schemes.
“Two of the firms involved in the review have confirmed they used a very well-documented insistent clients process. But we now have evidence that suggests the FCA does not recognise insistent clients and views it as a poor outcome.”
EY senior adviser Malcolm Kerr adds: “There is a connection between this review and the concerns over insistent clients following the pension reforms.
“It is not a good idea to execute a transaction that you believe is not in the interests of the client, regardless of what documentation you have. The FCA is likely to remain concerned about this whole area.”
The FCA declined to comment.