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FCA urges IFAs to check PI cover in wake of DB transfer scandal

Magnifying-Glass-And-Text-Kindle-Contract-700x450.jpgThe FCA says all regulated advisers should keep their professional indemnity insurance providers informed of any claims made against them.

In an update published today, the watchdog reiterates the message firms are responsible for ensuring they adhere to the terms of their indemnity agreement in its latest briefing on the British Steel Pension Scheme saga.

The regulator also says it is looking into the suitability of the advice firms gave to members of BSPS and wants to ensure clients know they can complain to the Financial Ombudsman Service.

It adds: “Any former BSPS member who was given financial advice to transfer out of the BSPS, and is unsure if the advice was suitable, should make a complaint. Firstly, they should make the complaint to the firm that provided the advice.

“The firm should give them a formal response within eight weeks. If complainants do not get a response within eight weeks, or don’t agree with the response, they should contact the FOS to refer the complaint to them.”

Also published today among a host of FCA responses to Freedom of Information Act requests, is a document about the watchdog’s supervision work on BSPS.

The FOIA request ask when the FCA first made contact with ten firms that had their permissions voluntarily removed over concerns relating to their pension advice processes.

These firms were Retirement & Pensions Planning Services, Active Wealth, Acklam Financial, Pembrokeshire Mortgage Centre, West Wales Financial Services, Bartholomew Hawkins, County Capital Wealth Management, Inspirational Financial Management, Mansion Park and Vintage Investment Services.

The FOIA request also asks if the above contact was a part of the FCA’s multi-firm supervision exercise into pension transfers.

A table reproduced below answers these two questions:

Last December Money Marketing revealed the FCA is setting up a central database on firms involved in defined benefit transfers to help it monitor the sector better.



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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 1st March 2019 at 6:18 pm

    A pity the FCA has never adopted a similar stance over the sales of UCIS and such like, in respect of which anecdotal evidence suggests that most of the the culprits have never had any PII cover at all. Those transacting occupational transfers may have had it but not for what some of them have advised clients to invest in via their SIPP.

  2. Julian Stevens 2nd March 2019 at 1:32 pm

    Does the FCA have any evidence or data indicating that any FA firms do anything other than inform their PI insurers immediately of any complaints against them which might develop into a claim? Knowing PI insurers’ propensity for seeking ways to avoid paying out, they’d be foolish not to.

    • Agreed, this seems like a red herring to me. Unless firms involved are in serious disarray it doesn’t seem likely they would fail to inform the one third party that could help them out.

      The biggest danger is that PI firms wake up and decide they don’t want to cover DB transfers any more. The cover works on a claims arising basis so they have a get-out at every renewal. Given the FCA are still finding more than 50% of cases are unsuitable, who would want to be in the market for covering losses on these?!?

      Perhaps I’m missing something. Would any advisers reading this invest their own money in insuring DB transfers?

      • @Grey Area
        Lets not forget the two areas where these transfers ought to be considered:
        1)Ill health
        2)Where there is demonstrably adequate wealth to facilitate drawdown of non pension assets with the pension transfer funds being preserved for IHT planning.
        Otherwise it is a difficult judgement call to justify a transfer given longevity risk.

        • I agree with you which is why I don’t see the point in becoming authorised as a firm to advise on DB transfers. Not worth the risk of not being able to obtain PI renewal, simply to enable us to advise on something where the starting point remains an assumption that leaving as is, is the best course of action and whilst the exceptions you mention do exist, they are so few when you have a small client base that where you come across the exceptions,directing the consumer to an adviser who specialises and whose PI reflects this makes more sense than trying to do in house.

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