The FCA has written to firms reminding them of its requirements related to pension transfers and reiterating its concern about applying a “commoditised approach” to this work.
The letter, dated 16 January but published on the FCA’s website today, was sent to all firms that have permissions to advise on pension transfers and opt-outs.
The letter, signed by executive director of supervision Megan Butler, prefaces further data collection advisers can expect from the regulator this year.
It says: “Later this year we will also be collecting data from all firms who hold the pension transfer permission with the intention of assessing practices across the entire market to build a national picture. We may therefore review in the future any pension transfer advice you have given, or may give.”
In the letter, the FCA says it is aware that firms offering a commoditised approach to pension transfer advice are more likely to give unsuitable advice or fail to recommend a suitable “destination fund”.
It defines a commoditised approach as one that does not include a complete analysis of a client’s personal circumstances or needs and might include generic assumptions to arrive at a personal recommendation.
The letter says: “Commoditised business models do not adequately focus on the clients’ needs and personal circumstances and can result in a high incidence of unsuitable advice to transfer. Our recent work in this area, which is summarised in the October 2017 Alert, identified that in only 47per cent of files reviewed, transfer advice was suitable. This is a serious concern to us, hence our ongoing focus on this area.”
The FCA says firms should consider several documents it has published relating to pension transfers as well as the relevant COBS pension transfer rules at COBS 19.1 and its suitability rules at COBS 9.
The documents it highlights in the letter are an August 2016 alert about introducers, a January 2017 alert about pension transfer advice, handbook guidance on insistent clients that was effective from 3 January, the recent pension transfers consultation – CP17-16, and an October alert with the findings of its supervisory work.
The letter says: “You should use this information to evaluate the way you provide pension transfer advice so this is in line with our expectations.”